New computer system to prevent tax fraud
LOUISIANA — Recent actions by the US Congress regarding the fiscal cliff legislation, known as the American Taxpayer Relief Act (ATRA), delayed the date when Internal Revenue Service (IRS) tax returns may be filed. Today, January 30, is the first day when federal income returns will be accepted. The Louisiana Department of Revenue (LDR) will also begin to receive income tax returns today.
The majority of IRS tax returns are now filed electronically. In 2012, 80 percent of all federal tax returns were filed electronically, fulfilling a goal Congress set in 1998. Since 2007, the number of Louisiana taxpayers filing their taxes electronically has risen by 58 percent. In 2011, 1.6 million Louisiana taxpayers (82 percent of the total number of Louisiana taxpayers) e-filed filed their state income tax return.
With the increase in electronic filing, tax fraud has skyrocketed. At the federal level, tax fraud remains the third largest theft of federal funds (just behind Medicare/Medicaid and unemployment insurance fraud) and has risen to a record 1.1 million cases in 2011. With the rise in electronic filing of Louisiana state income tax returns, state tax fraud has also increased. Tax fraud cases in Louisiana directly discovered as a result of current theft protection measures have risen to almost 23,000 cases in 2012.
LDR has taken steps to prevent e-filing fraud in coordination with the IRS. When current Executive Counsel, Tim Barfield and Chief of Staff Jarrod Coniglio first arrived at the agency late in 2012, a priority was placed on protecting the public from tax fraud with the installation and integration of new fraud protection software.
“When I first saw the data and the growing possibility for millions of dollars to be stolen from the state of Louisiana, we wanted to put in measures that would immediately maximize LDR’s efficiency to prevent tax fraud,” Barfield said.
LDR worked during December 2012/January 2013 to develop a customized Louisiana-specific fraud protection computer interface. The new system required a significant testing phase to assure accuracy of the system, protect taxpayer identity, and secure all confidential taxpayer information.
All state income tax returns received on or after January 30, 2013, will be subject to identity verification through the new tax protection software. The first taxpayer returns will be processed February 15, 2013. Refunds will begin to be issued on February 26, 2013.
If a return is identified as questionable in the review process, the taxpayer will then be directed to a customized online data test or a telephone survey that will serve as a secure method to verify the identity and final certification of the return.
“We are confident this new system will help protect the public trust against tax fraud,” Barfield stated. “Our goal is to increase the efficiency and effectiveness of this agency as we serve Louisiana taxpayers during the tax season.”