Alabama recently became the first state in the nation to employ a selfie verification system that officials hope will cut into tax refund fraud.
The Alabama Department of Revenue is encouraging taxpayers to download an iOS app that can be used as a fraud verification system that cuts down on paperwork for both parties and increases the agency’s confidence in taxpayer identity. Launched on April 11, the project cost the state approximately $250,000, but could save much more than that in fraud avoidance if the service is effective, an agency official told StateScoop. Nationwide, tax refund fraud adds up to about $21 billion annually.
Brenda Coone, deputy commissioner of the Alabama Department of Revenue, said the state first learned of the “intriguing” technology offered by vendor MorphoTrust through a grant program offered by the National Institute of Standards and Technology (NIST) via National Strategy for Trusted Identities in Cyberspace (NSTIC), an Obama-era initiative designed to create a new generation of identity management technologies that are:
- Privacy-enhancing and voluntary
- Secure and resilient
- Cost-effective and easy to use
Though Georgia and North Carolina had already secured the grant slots, Alabama saw enough potential in the technology to prioritize the project and launch a procurement first.
It’s still early to make judgements about the app’s long-term impact, Coone said, but by putting more information into the hands of taxpayers, it is “empowering” their constituency, regardless.
“It’s another tool in our toolbox to fight income tax fraud and it helps the jurisdictions validate the taxpayers and it helps taxpayers get their refunds faster, which means it then reduces the number of calls that will be coming in to everyone’s offices asking where is their refund,” she said. “It puts when their refund is released in the hands of the taxpayers, which is something different that we’ve not been able to give the taxpayers before.”
The app — which Coone said will soon also be available on Android — works by first allowing the user to validate their credentials with the Alabama Law Enforcement Agency (ALEA). A front-and-back scan of the user’s driver license or ID card are submitted along with a selfie. Once verified, the user then registers with the Department of Revenue. Unlocking the app to receive a status update on a tax return requires the user submit a new selfie.
While also adding Amazon-style tracking to the process, the app also serves as a fraud monitoring system — when a claim is made, the state will push a notification to the app, asking for the user to verify its veracity. Officials are hopeful the app will reduce fraud and back-office paperwork by building a database of trusted identities, but the technology is being advertised as a “VIP” service designed to serve the citizen’s needs. Those who use the app skip to the front of the line and will receive their returns first.
Coone said the state did a lot of spoof testing to ensure the app was secure and couldn’t be fooled by videos or still images.
“We are confident it is secure,” Coone said. “And we get that confidence because it is validating your selfie and the information that you scanned from your credentials with ALEA, the agency that actually issued the credentials.”
North Carolina, one of the states initially pursuing the technology, dropped the project. In an email to StateScoop, a state spokesperson reported that while the Department of Revenue was initially interested, “logistical challenges with staffing resources and issues with interagency information sharing prevented them from implementing the solution.”
A spokesperson from Georgia reported the state is still testing the software.
Alabama’s app launched just a few days before the end of the regular tax filing season, but as the extended filing period stretches into October, both the state and the vendor monitor progress. While official statistics have not yet been released, Mark DiFraia, senior director of digital credentials & ecosystems at MorphoTrust told StateScoop that user adoption in the state is promising.
“Even though it’s late in the season and we’re into the late filer timeframe, we are aware of a list of people that have proactively had their tax return protected with this technology already,” DiFraia said.
DiFraia, who also serves on the Identity Ecosystem Steering Group (IESG), said that technologies like this and others being developed by his firm, like a smartphone drivers license app that was piloted by Iowa, are part of an evolution in identity management that returns control to the user.
“When we do business in cyberspace in some sort of automated way, we tend to feel a loss of control over where our identities go and what happens to them and who stores them and what they do,” DiFraia said. “These products are built around giving people control and consent and the ability to manage the privacy of their credentials wherever they participate.”