Why Did the IRS Take The Online “Get Transcript” Tool Away From Tax Payers in 2016?
IRS Suspension of Online Transcripts is going to be the biggest change to this tax filing season. For the past few years, taxpayers have relied on being able to go online and pull their Personal Tax Account Transcripts. In 2016 you will not have this option. This may make tax season a little more hectic for some. Almost 330,000 American taxpayers, both individuals, and businesses have fallen victim to one of the most sophisticated theft schemes in U.S. Treasury Department history. The theft involves the IRS’s online “Get Transcript” application process. The theft started in February 2015 but was not caught until May 2015. Billions of tax dollars now reside in offshore bank accounts.
How did this happen? What’s being done to protect the American Taxpayer?
The internal Revenue Service (IRS) suffered a four-month-long cyber data breach in which hundreds of thousands of taxpayers’ accounts were compromised. Thieves tried to access the tax accounts of nearly 700,000 taxpayers, succeeding in about half of their attempts. Of those 330,000 breaches, approximately 36,000 fraudulent tax year 2014 returns were filed to claim false tax refunds. However, 23,000 of those returns were flagged by fraud filters and were stopped in the progress.
They obtained taxpayers' social security numbers, addresses, birth dates, filing statuses, and salary histories. How, exactly, they gathered this information is still unknown, but the IRS's servers were not hacked to retrieve this data, the thieves had the information prior to accessing the IRS's applications. Through the IRS' online “Get Transcript” application, the thieves, believed to be organized crime syndicates based in Russia, were able to access prior-year tax returns and file thousands of fraudulent returns between February 2015 and May of 2015.
Due to this breach, the “Get Transcript” application has been temporarily shut down and the IRS plans to notify all taxpayers who were affected. If you were one of the 330,000 whose tax account was accessed, you will receive free credit monitoring and be issued an Identity Protection PIN (IP PIN). You will need to use the IP PIN on current and all future tax returns or the return will be rejected as a future fraud-prevention tactic.
The Criminal Investigation Unit of the IRS and the Treasury Inspector General for Tax Administration are investigating, and the Department of Homeland Security and Federal Bureau of Investigation were alerted and have opened investigations, as well. Hearings have been scheduled with IRS leaders.
It is estimated that the IRS and state tax authorities witnessed an increase in fraudulent tax activity as high as 3700% in 2015. The IRS is pledging to make its tax filing system more secure by 2016, as a result of this data breach and the millions of taxpayers who have had identities stolen in prior years.
What type of Transcripts Were Effected
There are four types of transcripts available to the public from the IRS.
- Tax Return Transcript – This transcript shows the detail stated in a specifically filed tax return. When you file your return electronically IRS agents use this transcript to see return details. However, this transcript does not show a photocopy of the actual return. This is why examining agents always request a hard-copy of your return.
- Tax Account Transcript – This transcript shows very limited detail such as the type of return, taxable income, and marital status. This type of transcript is rarely used by practitioners.
- Record of Account Transcript – This is the most popular transcript with attorneys and accountants. Most likely this is the category of transcript sought by identity thieves.
- Wage and Income Transcript – This transcript is used in the preparation of back tax returns when a client's records are of poor quality. These transcripts only show W2, government benefit payments, such as social security, and 1099 input.
They are limited use and are useless to identity thieves as they do not show refunds pending.
What has the IRS done to Prevent Breaches of this Type from Reoccurring
IRS Commissioner John Koskinen has been working closely with Senator Orrin Hatch, Chairman of the Senate Finance Committee and Paul Ryan, Chairman of the House Ways and Means Committee to investigate and design systems to protect what is known as Stolen Identity Refund Fraud (SIRF). The key concern of the committee is the growing threat of SIRF to tax administration. This concern will only be amplified due to the recent IRS breach," wrote Hatch.
I have learned that every year more than 140 million individual income tax returns and almost 6 million corporate returns are filed. This does not take into account millions of quarterly business payroll tax returns that are also filed. Members of Congress are doing their own individual investigations into the method by which computer and online tax preparation services, as well as major pre-paid debit card providers, screen for SIRF.
So far no one has any concrete answers or solutions except to identify organized crime as the culprits. These criminals are using very sophisticated hacking and are depositing your refunds in offshore foreign bank accounts.
The IRS recently published "Get Transcript Application: Questions and Answers." One of the questions is "What should people do to protect themselves?" Here is what the IRS said:
"Identity theft is just one of the many reasons why people should think twice before posting publicly personal or financial information on social media or the Internet. People should also make sure their computers are up to date with the latest security software."
Senate Finance Committee ranking member Ron Wyden has stated: "In fact, there is a reason to believe the IRS will be more frequently targeted in the future." Mr. Wyden added that in order to protect taxpayers from "this onslaught of cybercrime, the IRS needs a 21st-century IT system." Unfortunately Congress, in its wisdom, has reduced IRS funding for cybersecurity from $187 million in 2011 to $149 million in 2015. And we the American taxpayers may be paying the price. The usual government response to a crisis is to demand more funding.
The importance of having online Record of Account Transcripts
The Where's My Refund? Tracking tool needs to be overhauled and updated. This tool does not give you the most updated information taxpayers want to see. So taxpayers in previous years resorted to the Record of Account Transcripts to pull more recent information on their personal tax account. You could use the online transcripts to determine an accurate status of your return and even direct deposit dates.