Tax returns and identity fraud: hidden costs

” In sum, e-filing helps the IRS with audit selection, costs the Treasury billions through fraud, and transfers many costs of tax administration to you.”

Starkman: E-Filing and the Explosion in Tax-Return Fraud

What this means is that the input is automated, the processing for IRS needs is simplified, but the verification process is insufficient. Things like verifying that the taxpayer ID on the return is the same as the one on the bank account before doing a direct deposit don’t seem to be in the list. With the data the IRS and the government maintains, data mining techniques could be used to help detect and prevent fraud. The private sector, credit card companies for instance, do this.

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