NEWS from the IRS

Marc J. Zine
Senior Stakehold Liaison - IRS
Tax Professional & Industry Organizations 
Phone 916-974-5281
Fax 877-477-8639
Marczine@irs.gov

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Franchise Tax Board: February 2018 Newsletter


This Just In!

Posted 2.8.2018
Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identify Theft ~ HOWEVER:

Statement by H&R Block on the Security Summit Success
Feb. 8, 2018

“While the incidents of stolen identity refund fraud have gone down significantly, we can never let our guard down.  The fraudsters are adaptive, and the work of the Security Summit is critical to our ongoing efforts to better protect taxpayers,” said Kathy Pickering, vice president of regulatory affairs and executive director of H&R Block’s The Tax Institute.


 

Public Announcements

The following Pubic Announcements have been archived below:

IRS: Remote Access Takeover - Click here to read.
IRS: W2 Email Scams - Click here to read.
IRS: The Dirty Dozen Scams of 2017 - Click here to read.

CSTC -- IRS Don't Take the Bait:

IR-2017-127, Aug.8, 2017  

WASHINGTON – The Internal Revenue Service, state tax agencies and the tax industry today reminded tax professionals that their entire digital network could be at risk for remote takeover by . Such a takeover could lead to fraudulent tax filings and damage to their clients. 

Increasing awareness about remote takeovers are a part of the“Don’t Take the Bait” campaign, a 10-part series aimed at tax professionals. The IRS, state tax agencies and the tax industry, working together as the Security Summit, urge practitioners to learn to protect themselves from remote takeovers. This is part of the ongoing Protect Your Clients; Protect Yourself effort.   

“This is another emerging threat to tax professionals that the IRS has seen on the rise,” IRS Commissioner John Koskinen said. “A remote takeover can be devastating to practitioners’ business as well as to the taxpayers they serve. It’s critical for people to take steps to understand and prevent these security threats before it’s too late.”  

A remote attack targets an individual computer or network as the cyber criminal exploits weaknesses in security settings to access the devices. Another line of attack uses malware to download malicious code that gives the criminals access to the network. Especially vulnerable are wireless networks, including mobile phones, modems, and router devices, printers, fax machines and televisions that retain their factory-issued password settings. Sometimes, these devices have no protection at all.  

There are multiple ways that can gain control of computers and other devices. Phishing emails with attachments can easily download malware that, when opened, give the criminal remote control of a computer.  

also can deploy certain tools that allow them to identify the location of and get access to unprotected wireless devices. For example, a printer with a factory-issued password can easily be accessed, and the criminals can see tax return information stored in its memory.  

The IRS urges tax profession also take the following steps to help protect themselves from remote takeovers:  

  • Educate staff members about the dangers of phishing scams, which can be in the form of emails, texts and calls, as well as the threat posed by remote access attacks;
  • Use strong security software, set it to update automatically and run a periodic security “deep scan” to search for viruses and malware;
  • Identify and assess wireless devices connected to the network, including mobile phones, computers, printers, fax machines, routers, modems and televisions. Replace factory password settings with strong passwords.
  • Strengthen passwords for devices and for software access.Make sure passwords are a minimum of eight digits (more is better) with a mix of numbers, letters and special characters;
  • Be alert for phishing scams: do not click on links or open attachments from unknown, unsolicited or suspicious senders;
  • Review any software that employees use to remotely access the network as well as those used by IT support vendors to remotely troubleshoot technical problems. Remote access software is a potential target for bad actors to gain entry and take control of a machine. Disable remote access software until it is needed. 

Additional IRS Resources: 


W-2 Email Scam

IR-2017-130, Aug.15, 2017

WASHINGTON – The IRS, state tax agencies and the tax industry today urged tax professionals and businesses to beware of a recent increase in email scams targeting employee Forms W-2.  

The W-2 scam – called a business email compromise or BEC – is one of the most dangerous phishing email schemes trending nationwide from a tax administration perspective. The IRS saw a sharp increase in the number of incidents and victims during the 2017 filing season.

 Increasing awareness about business email compromises is part of the“Don’t Take the Bait” campaign, a 10-part series aimed at tax professionals. The IRS, state tax agencies and the tax industry, working together as the Security Summit, urge practitioners to learn to protect themselves and their clients from BEC scams. This is part of the ongoing Protect Your Clients; Protect Yourself effort. 

A business email compromise occurs when a cyber criminal is able to “spoof” or impersonate a company or organization executive’s email address and target a payroll, financial or human resources employee with a request.For example, fraudsters will try to trick an employee to transfer funds into a specified account or request a list of all employees and their Forms W-2.

“These are incredibly tricky schemes that can be devastating to a tax professional or business,” said IRS Commissioner John Koskinen. “ target people with access to sensitive information, and they cleverly disguise their effort through an official-looking email request.”

The Federal Bureau of Investigation reported earlier this year that there has been a 1,300 percent increase in identified losses – with more than $3 billion in wire transfers – since January 2015. The FBI found that the culprits behind these scams are national and international organized crime groups who have targeted businesses and organizations in all 50 states and 100 countries worldwide.

During the 2016 filing season, the IRS first warned businesses that the scam had migrated to tax administration and scammers were using business email compromise tactics to obtain employees’ Forms W-2. The criminals were immediately filing fraudulent tax returns that could mirror the actual income received by employees – making the fraud more difficult to detect.

In 2017, the IRS saw the number of businesses, public schools, universities, tribal governments and nonprofits victimized by the W-2 scam increase to 200 from 50 in 2016. Those 200 victims translated into several hundred thousand employees whose sensitive data was stolen. In some cases, the criminals requested both the W-2 information and a wire transfer.

The Form W-2 contains the employee’s name, address, Social Security number, income and withholdings. That information was used to file fraudulent tax returns, and it can be posted for sale on the Dark Net, where criminals also seek to profit fromthese thefts.

If the business or organization victimized by these attacks notifies the IRS, the IRS can take steps to help prevent employees from being victims of tax-related identity theft. However, because of the nature of these scams, many businesses and organizations did not realize for days, weeks or months that they had been scammed.

The IRS established a special email notification address specifically for businesses and organizations to report W-2 thefts: dataloss@irs.gov. Be sure to include “W-2 scam” in the subject line and information about a point of contact in the body of the email. Businesses and organizations that receive a suspect email but do not fall victim to the scam can forward it to the BEC to phishing@irs.gov, again with “W-2 scam” in the subject line.

 Protecting Clients and Businesses from BECs

The IRS urges tax professionals to both beware of business email compromises as a threat to their own systems and to educate their clients about the existence of BEC scams.Employers, including tax practitioners, should review their policies for sending sensitive data such as W-2s or making wire transfers based solely on an email request.

Tax professionals should consider taking these steps:

  • Confirm requests for Forms W-2, wire transfers or any sensitive data exchanges verbally, using previously-known telephone numbers, not telephone numbers listed in the email.
  • Verify requests for location changes in vendor payments and require a secondary sign-off by company personnel.
  • Educate employees about this scam, particularly those with access to sensitive data such as W-2s or with authorization to make wire transfers.
  • Consult with an IT professional and follow these FBI recommended safeguards:

o   Create intrusion detection system rules that flag e-mails with extensions that are similar to company email. For example, legitimate e-mail of abc_company.com would flag fraudulent email of abc-company.com.

o   Create an email rule to flag email communications where the “reply” email address is different from the “from” email address shown.

o   Color code virtual correspondence so emails from employee/internal accounts are one color and emails from non-employee/external accounts are another.


IRS Recaps

IRS Recaps “Dirty Dozen” List of Tax Scams for 2017

Each year, the Internal Revenue Service issues a list of the top 12 tax-related scams it sees throughout the year. The IRS “Dirty Dozen” highlights various schemes that taxpayers may encounter anytime, many of which peak during tax-filing season.

Taxpayers need to guard against ploys that steal their personal information, scam them out of money or talk them into engaging in questionable behavior with their taxes.

Here is a recap of this year's "Dirty Dozen" scams:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a tax bill or refund. Don’t click on emails or fake websites claiming to be from the IRS. They may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft, especially around tax time. The IRS aggressively pursues criminals that file fraudulent returns using someone else’s Social Security number Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid becoming victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Look out for charities with names similar to familiar or nationally-known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be cautious of anyone promising inflated refunds. Avoid preparers who ask taxpayers to sign a blank return, promise a big refund before looking at any records or charge fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find their victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit. This tax benefit is generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsify deductions or expenses on their tax returns in order to pay less than they owe or  receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. Claiming false income can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, seek an independent opinion if offered complex products. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of such schemes encourage taxpayers to make unreasonable and outlandish claims, even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats -- and the financial organizations that help them -- show that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and taking care of their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program to enable people to catch up on their filing and tax obligations. (IR-2017-35)