The IRS announced it will transition away from using a third-party service for facial recognition over the next several weeks. The IRS had been using a service provider named ID.me to validate and verify taxpayer identities when accessing certain online information about their taxes. ID.me was to collect facial recognition date to provide an added layer of security to protect taxpayers from potential identity theft.
The Service has seen a significant rise in Stolen Identity Refund Fraud ("SIRF") over the past decade. Typically SIRF perpetrators file false returns electronically, early in the tax filing season so that the IRS receives the false SIRF return before legitimate taxpayers have time to file their returns. The SIRF perpetrators arrange to have the refunds electronically transferred to debit cards or delivered to addresses where they can steal the refund out of the mail. The IRS estimated that during the 2013 filing season alone, over 5 million tax returns were filed using stolen identities, claiming approximately $30 billion in refunds. The IRS was able to stop or recover over $24 billion of that total, or approximately 81% of the fraudulent claims. That still left over 5 billion in losses in a single tax year. Identities used in SIRF crimes may be stolen from anywhere. For example, SIRF criminals have used Social Security Numbers stolen from hospitals, nursing homes, and public death lists, thereby exploiting some of the most vulnerable members of our communities, including the elderly, the infirm, and grieving families.
To combat this problem, the IRS is attempting to find a more secure method to facilitate all of its interactions with the public. The initial facial recognition program was to be used to verify taxpayer identity when requesting information from the service rather than during the return filing process, concerns about privacy and security have led the service to transition away from this program, and to search for a better alternative. In the meantime, taxpayers should be aware of the scope of the problem faced by the service. The best solution from a taxpayer's perspective is to file their return as early as possible to prevent an identity thief from claiming their refund.