How the IRS Tackles Fraud

With every working citizen of the United States having to file taxes, the number of tax returns is in the hundreds of millions. With a system so large, it may seem easy to get lost in the crowd. This is what many who cut corners on taxes tend to believe. The IRS has a number of safe guards in place to stop tax schemes. Here are some ways that the IRS deals with fraud. TaxFraudPic

Enlisting the Help of Tax Preparation Firms

One of the most prevalent forms of tax fraud involves tax refunds. Some people and even some tax preparation companies attempt to steal income tax refunds from unsuspecting customers. The IRS and tax preparation firms have made an agreement to capture and share information to catch those who try to steal identities in the act.

PIN System

The IRS has begun a personal identification number, or PIN system. A PIN is assigned to each person who uses the internet to file taxes. This PIN must be used to access tax information or to file taxes for the next year. This type of system serves as a passcode system in order to protect from fraud.

Educating Auditors

The large majority of tax fraud that is committed by individuals on their own taxes is under reported income. Auditors are educated on how to look for income that has not been reported and other common methods of tax fraud. Auditors are trained on how to inspect receipts and look for check issues.

Image credit: Mark Warner

About the author

Seattle CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.

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