Industry: Report on Tax Refund Delays Misses Mark
A recent report claiming that heightened anti-tax fraud efforts have led to taxpayers suffering delays in receiving refunds via prepaid cards mischaracterizes the situation, industry observers say. A report by the Associated Press earlier this month claimed that stepped-up efforts by the IRS and payments industry to combat the surge in identity theft-related tax fraud have caused “thousands of people” to have their prepaid cards frozen when trying to direct tax refunds to their accounts. The report details an instance in which one taxpayer was required to send a picture of her state ID card to verify her account—a process that took more than two weeks and required several customer service calls, according to the AP.
The report, which showed up in other news outlets, blames such delays on recent efforts by the IRS Security Summit—a public-private partnership established last year to help combat the spike in ID theft-related tax fraud—to tighten ID verification procedures for tax refunds. But Brad Fauss, president & CEO of the NBPCA, says, “There have been recent news reports suggesting that the efforts of the IRS Security Summit have caused an increase in prepaid card providers freezing tax refund deposits and requesting further verification from taxpayers. In reality, prepaid card providers have been employing many of the same fraud deterrence procedures as in past years, which mirror tactics utilized in connection with traditional checking accounts,” Fauss tells Paybefore. “Prepaid card providers monitor accounts for unusual activity, block accounts when an indicator is triggered, contact the taxpayer to verify the legitimacy of the deposit, then promptly unblock the account if the deposit is deemed legitimate.”
ID theft-related tax fraud has ballooned in recent years as criminals have taken advantage of loopholes in tax filing and return processing steps—as well as the abundance of stolen personal data—and a cash-strapped IRS. In 2015, the agency said it stopped 1.4 million confirmed identity theft returns, totaling $8.7 billion. To combat the problem, the IRS has turned to the private sector, joining with tax preparation software firms, payroll and tax financial product providers and state tax administrators last year to launch the Security Summit, which is tasked with identifying and implanting new safeguards to stop tax fraudsters.