To curb fraud, IRS will request more info on biz clients in 2018

Chris Gaetano
Published Date:
Sep 26, 2017

The IRS has announced that, in 2018, it will be asking tax preparers for more information about their business clients as part of an effort to curb identity theft and fraud. In a news release dated July 25, the agency was not specific about exactly what the new information would be, listing, instead, examples of the kind of information tax professionals “may be asked to provide when filing their business, trust or estate client returns.” In a fact sheet also dated July 25, the IRS said that tax preparation software for business-related returns “will ask the following questions”:

• The name and Social Security number of the company individual authorized to sign the business return. Is the person signing the return authorized to do so?

• Payment history: Were estimated tax payments made? If yes, when were they made, how were they made and how much was paid?

• Parent company information: Is there a parent company? If yes, who?

• Additional information based on deductions claimed.

• Filing history: Has the business filed Form(s) 940, 941 or other business-related tax forms?

In the news release, the IRS also warned preparers to beware of any potential business clients claiming that they do not currently have an Employer Identification Number.

As of press time, an IRS spokesperson had not responded to a query asking whether it will be a requirement for companies to answer these additional questions, or whether it will be optional.

James P. Bressingham, the chair of the NYSSCPA’s Relations with the Internal Revenue Service Committee, said that his committee has been in communication with the IRS on this matter. The Society will provide updates on the Trusted Professional blog and Exchange when more information is available.

Bressingham also said that he and the members of his committee want to help the IRS but wonder whether, paradoxically, including this information might actually put clients at higher risk of identity theft. He said that it called to mind the New York State Department of Taxation and Finance recently asking for the driver’s license numbers of taxpayers, as an additional authentication measure. While the request was ostensibly for protection against identity theft and fraud, certain practitioners raised concern that it would give potential identity thieves one more piece of validating information to use against their victims.

“I just keep thinking, they keep requesting more and more information which, in general, could provide more areas for identity theft. … We’re not against trying to share information that could stop hacking. [But] we have states like New York that request your driver’s license number, and if you share that type of information, of course someone can get it and then use it against you. You’ve got to be very careful of what you are doing,” he said.

Johnpaul Crocenzi, a member of the Taxation of Individuals Committee, wondered how useful the information would be in the first place, considering that the IRS already knows some of what it’s asking for, like the names and Social Security numbers of those authorized to sign the business return.

“That information is there, so I don’t know how that will help stop these bogus returns,” he said.

Nonetheless, like Bressingham, he said he supports the principle of what the IRS is trying to do, and said that it’s a lot easier to take proactive measures against fraud than it is to have to contact the IRS and work with its agents to unravel a fraudulent return that’s already been submitted.

Both Crocenzi and Bressingham, in separate conversations, suggested that some kind of password-based authentication system similar to what the IRS does for individual victims of identity theft might be a better solution to discourage fraudulent returns.

Barry S. Kleiman, another member of the Taxation of Individuals Committee, noted that, sometimes, clients will push back against providing this kind of information, recalling some of his own experiences with the New York state driver’s license requirement, but he ultimately said that these kinds of efforts are for the best.

“A lot of people [are reluctant] to give this information to us, even though it’s required for New York state returns. Obviously, yes, we’re going to get some pushback [on this] but, in the end, it’s for [their] best interest,” he said.


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