Expecting to receive a few hundred dollars on your 2017 federal and state returns, you excitedly file your taxes electronically and wait for that hefty check in the mail. Except it’s not coming in the mail . . . at least not to you.
Why? A hacker gained access to your personal records and fraudulently filed your taxes themselves. Who knows? By now, they could be blowing your tax refund on a new sound system for their car.
Last summer’s data breach of the Equifax credit reporting agency compromised personal information of more than 140 million Americans. Social Security numbers. Addresses. Birth dates. Credit histories. All possibly at a cybercriminal’s fingertips. Tax fraud was a problem before. Now, it has the potential to reach epidemic status.
If you are the victim of tax fraud, what can you do? Unfortunately, most are not aware that they have been victims of tax fraud until they have already filed. At that point, you will need to file a Form 14039—an identity theft affidavit—and provide the appropriate
proof of your identity. Resolution can take time, so be patient. For what it’s worth, the IRS is also moving toward greater means of protecting your identities with more thorough verification codes that you will note on your returns. This is one of the ways the IRS is working to protect your privacy.
Whether or not you fall victim to tax fraud this spring, it’s wise to take additional measures to protect yourself from identity theft. Why is this important? A 2017 identity fraud study released by Javelin Strategy & Research, a research-based advisory firm, found that more than $16 billion was stolen from 15.4 million US consumers in 2016 alone.
What can you do to protect yourself? If your records were compromised, then you should consider registering for one of many credit-monitoring services. Secondly, you can freeze your credit reports with each of the major credit reporting organizations—Equifax, TransUnion, and Experian. Contacting each agency, one by one, is somewhat time consuming and each action comes with a nominal fee, but it’s worth the peace of mind. However, you must contact these agencies and unfreeze your credit each time you need to open a new account.
Once your credit is frozen, it’s very difficult for a cybercriminal to open accounts in your name.
Lastly, guard your personal information closely and change passwords frequently for any online account that you might have.
Identity theft is a growing worldwide problem and the Equifax data breach only opens the door to future potential problems. One can only speculate how many fraudulent tax returns will result from it. Suffice it to say, there will be many. Be prepared.
Bobby Lowder Professor
Department of Finance