Part 4 – DMF Paradigm – Analysis Begins

The previous articles in this series are found at:

Part 1 —  http://www.fgs.org/rpac/2015/01/09/the-death-master-file-paradigm-introduction/

Part 2 — http://www.fgs.org/rpac/2015/01/21/dmf-paradigm-part-2-what-we-thought-we-knew-in-2011/

Part 3 — http://www.fgs.org/rpac/2015/03/06/part-3-dmf-paradigm-countermeasures-taken/

What Do We Know Now That We Did Not Know in 2011?

The data necessary to initially determine the nature and magnitude of tax fraud by identity theft cases in 2011 would not become available until the fall of 2013 with the publication of the report of the Treasury Inspector General for Tax Administration dated September 20, 2013 found at:  http://www.treasury.gov/tigta/auditreports/2013reports/201340122fr.pdf

The chart below is drawn from Tax Year 2011 tax returns, those filed in early 2012.  Please note that the only SSNs that would appear in the DMF/SSDI would be the “Deceased” Category.  The IRS was utilizing a limited screening filter that appears not to have used the DMF to flag for special attention returns citing the SSNs of deceased individuals.

The following chart is particularly informative:

TIGTA Fig 4

In December 2011, genealogical web sites began masking the SSNs of recently deceased persons and the IRS reportedly significantly improved their software filters.  Even with deceased SSNs “exposed” during 2011, the 19,102 suspicious returns listed above represented less than 2% of the 1,086,998 potentially fraudulent returns filed in 2011.

Limitations on access to the DMF will have no impact on cases representing the misuse of the SSNs of living individuals (all the other categories in the chart above and representing the other 98% of the cases) nor SSNS of deceased individuals from compromised medical records.

Comparable 2012 data should give some measure of the effectiveness of the IRS improved filters.  The IRS should be directed to report to the Congress data that would provide a basis for measuring the extent of improvement in their screening filters and other measures to they are taking to deter fraudulent tax refunds involving identity theft.  Hopefully even this relatively small incidence of fraudulent use of deceased SSNs will be further reduced.

Both the Federal Trade Commission and the Taxpayer Advocate Service are reporting a significant increase (doubling?) in complaints of fraudulent tax returns involving identity theft.  We should be concerned that final 2012 data will show a dramatic increase in cases impacting the living.

 

Several additional posts addressing additional aspects of this topic are anticipated, including:

Part 5 – DMF Paradigm – Lessons Learned As Stakeholders Speak

Part 6 – DMF Paradigm — Suggested Paradigm Shifts

Part 7 — DMF Paradigm — Access, Preservation or Replacement Issue?

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