Posted on 04/09/2017 5:26:09 AM PDT by Kaslin
Right about now you are either leisurely enjoying your Sunday or in a panic because you have not filed your tax return. Most Americans are only concerned with when they are going to get their refund or that by next week they have to pay more taxes. I am here to tell you your highest concern should be the security of your personal information.
A fellow CPA called me recently with a story he thought was worthy of a column. He had just gotten a new client (no that isn’t the big news). While reviewing the tax information he had from the prior preparer, he saw that the husband and wife had the same date of birth. Wow, what are the chances of that? Technically, having the same birthday is 1 in 365, but that was not the case here. The husband stated he had a completely different birthdate.
That is where matters twisted my fellow CPA. The date of birth is essential for filing returns and matching government records -- especially the Social Security database. Yet there was no proper matching here. The couple had been filing their tax returns electronically for years with the husband having his date of birth incorrect.
I told my pal that I recently had a similar experience. My client relocated from California to Nevada (no shocking news there) and had to produce documentation to get a driver’s license. He did not initially have his birth certificate. During the process, his birth year was brought into question. I told him it had to be the one I had otherwise he could not have had his tax returns e-filed. Apparently, that is not the case.
If you are not aware, the IRS has had huuuuge problems with the security of its e-filing system. Many people have had tax returns filed in their names prior to their own actual filings. The taxpayers are then locked out and have to file paper returns. That is something frowned upon by governments today. They don’t want human involvement in the filing process. We CPAs are required to file electronically. Services like TurboTax help people file electronically to get their refunds faster. This fraud has cost the government (you and me) billions of dollars.
The government wised up this year and pushed back the time of releasing refunds. They had originally moved up the refund date because Congress was unhappy with the IRS dragging its feet getting the checks out to taxpayers, but that was prior to the days of e-file. The crooks figured this out and filed false returns with stolen information before the IRS was able to match 1099s and W-2s to taxpayers’ files. The refunds went out to the crooks and then taxpayers filed the actual returns. Taxpayers were caught in between the fraud and the government.
This year the IRS made sure all 1099s and W-2ss were filed by January 31st. They held up any refunds -- especially those with earned income tax credits (free money to someone who has not paid in any taxes) --until February 15th. This new rule upset retailers who base their sales on customers having refund money burning a hole in their pocket, particularly around Super Bowl Sunday and Presidents’ Day sales. Initial reports show incidents of fraud significantly lower because of this and other security measures being put into place.
There are still other concerns for you, the taxpayer. States are moving toward requiring driver's licenses or other state ID information being included to help identify taxpayers. As far as I can determine, three states – New York, Ohio and Alabama -- require additional ID and three request it – Kansas, California and Wisconsin. Knowing how this works I can see this becoming a universal requirement even while some will likely still argue against IDs for voting.
If you are not scared, you should be. Really scared. In one place the government will have all the information already on your tax return, with the addition of your driver’s license. For many they will also have your bank account information. Many states are moving toward requiring all tax payments be electronic which will force almost every taxpayer to combine all their financial info in one database that the government controls.
Somehow it gets worse. All of that information is on your tax preparer’s computer also. There is no telling how secure that may be either, and for professionals it can probably be accessed through the tax services even though they don’t retain the file info. The tax services have moved to ramp up the security of the tax programs on preparers’ computers and urged preparers to secure their computers. But all of us are fighting evil, diabolic crooks. We also don’t want to have the added liability of protecting all this info we don’t need to.
Personally, the idea of having all this information in one place being sent to the government to safeguard scares the dickens out me. The governments have proven less than capable at protecting their databases. And they have zero liability to you or me if our identity is stolen. The only thing they owe us is “I’m sorry” if we can even extract that from them.
I don’t have an answer here as to how best to solve the problem. More security is needed, but having everyone’s info in one place smells highly odoriferous. When they cannot match their current databases for dates of birth, what else are they screwing up?
I did mine the old fashioned way, via paper and mail. Probably more secure than Hitlery’s emails.
That is an understatement.
All electronic returns continue to exist "in the cloud".
The IRS encourages non-citizen, alien immigrants, to file even though they know of stolen identity.
By complying with a known insecure governmental aggregate identification system of taxation, are we now complicit in the illegal perpetuation of identity theft of lawful citizens ?
What happened to the "Rule of Law" under which we are governed, when the government encourages illegal behavior, especially in an known insecure system ?
The author states that he doesn’t have an answer.
I do.
Go to a national sales tax.
Permanently eliminate all income taxes.
Returns are not secure. Too many criminals in the IRS are selling the necessary information to their cohorts on the outside to file fraudulent returns. I had mine stolen and it took more than 2 years to get a PIN number so I could file a return.
OPM gave away the records for 100M people. Va got hacked. Anthem Blue Cross got hacked. Yahoo got hacked. NSA can hack anyone. NO ONE IS SAFE
One simple method to reduce the fraud is paper returns with the local zip code on a mail receipt. This means more work for the IRS and would cut the fraud significantly.
Flat tax or Trumps tax plan is a good solution because it simplifies the filing process for all and reduces the IRS staff by 90%
One simple method to reduce the fraud is paper returns with the local zip code on a mail receipt. This means more work for the IRS and would cut the fraud significantly.
Abolish the IRS, go with Fair Tax and all of this crap goes away.
I like the national sales tax, because every slug in the country would also make a contribution. None of these options will happen as long as a crooked judiciary is essentially running all branches of government.
When your worst enemy (the IRS) has your tax information, how much worse can it get?
If - and it’s a big if - the government was really “for the people” there would be no income tax. “We the people” surrender way too much private, personal information to the IRS. If - there’s that if again - our government really wanted to do what’s fair and just, the income tax system would be replaced in its entirety by a retail sales tax. Then, no personal, private information would need to be collected on citizens. The myriad complications associated with an income tax would simply disappear. But I’m afraid that our government and our politicians are much too corrupt to ever implement such a reasonable system. And, of course, there’s all those damned lawyers.
Dear Ottawa,
re: “I did mine the old fashioned way, via paper and mail. Probably more secure than Hitlery’s emails.”
Outside of a five year span, before the Turn of The Millenium, I have always done my own, with paper and pen.
I have made ‘pdf’ copies of everything, as well, and are stored off machine.
But with all that writing about IRS info sensitivity, it hasn’t helped a darn, with ALL my OPM stuff being hacked, and then with Yahoo being hacked.
Any electronic communication can be hacked. There is no security in online communication that even approaches a mechanical door lock. And locks only keep honest people out, as we are often told.
To hack your door lock, the hacker has to have physical access to the lock, your electronic comms can be accessed from anywhere in the world, by anyone.
Did mine in paper, with pen and careful Mech Engr lettering. Sent in by USPS. Made copies.
Got a letter from the CA state FTB. I owed ~$500 (vs the ~$100 refund that I calculated). Send it in now, or else!
They printed a summary; got my income wrong, calculated tax right, and withholding wrong. (Weird and illogical.)
Said they could not confirm my withholding (which was plainly printed on a US Govt 1099R) and used a smaller number from their EDD database.
I called and got things straightened out.
I asked why the problem. Something vague about ‘electronics’...
My scenario is that they scanned in my forms, OCR the numbers, and let some computer loose. If it dinged me, it was up to me to call for a fix, or pay without asking.
The clue was when I explained the situation, the guy at FTB said, wait a minute ... and came back with my correct calcuated refund, no argument (and no apology). We’ll mail it out. Expect it in 2-3 weeks.
I suspect he called up the scans and saw the plain numbers on the 1099-R, and my simple EZ form calculations, and knew his system had screwed up.
So the scans are out there, ‘protected by the state’, and vulnerable to China, Wikileaks, NSA et.al, basement hackers to sell to ??, etc.
Soon all info will be compromised to the point that none can be trusted.
Oh, yeah, I had put my bank numbers for electronic deposit.
EEK!
We are already there, IMO.
replaced in its entirety by a retail sales tax. Then, no personal, private information would need to be collected on citizens.
= = =
But pay by credit card, no cash.
So we can compare your patterns with your income to insure you are paying your ‘fair’ share, no cash, no barter.
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