Equifax Breach Triggers Tax Identity Theft Concerns
Many Americans dread tax season, and for very good reasons. Not only do they run the risk of having erred on their annual tax allocations, but also their sensitive data is suddenly everywhere, floating through the air, both figuratively on the web and literally in the mail. Every single number that could possibly identify you is in transit between the months of December and April as your income records make their way to you. This year in particular, in the shadow of the Equifax breach and leak of sensitive data like Social Security numbers, that feeling of unease is even more apparent and taxpayers are concerned about tax identity theft. Though the implications of the Equifax breach have yet to be entirely realized, the Internal Revenue Service (IRS) is taking steps to curb potential tax fraud and is encouraging U.S. citizens to do their part in protecting themselves come filing time.
What the IRS is Doing
Tax-related identity theft is the result of someone using a stolen Social Security number to file a tax return with the intent of fraudulently claiming a refund that does not belong to him or her. In 2011, after tax-related identity theft had become all too familiar a term, the IRS began a crackdown and from then through 2014, the organization halted nearly 19 million suspicious returns. In 2015, the IRS partnered with the organization the Security Summit, allowing for more efficient state and federal systems of identity verification and enhanced protections for taxpayers, specifically, the enhancement of password protocols for tax software.
This year, with the Equifax debacle still very much in mind, the IRS and Security Summit partners are refining current protections and initiating a few new ones. One new aspect is that the Form W-2 Verification Code will appear on official W2 forms. More than 65 million taxpayers will see a 16-character code on their W-2s, a feature for authenticating income and employment.
What You Can Do
File early. Though a good number of taxpayers won’t be eligible to file early due to late-arriving forms like K-1s and investment 1099s, those with simple W-2s are encouraged to file immediately upon receiving them. While waiting for your necessary documents, there are preparations you can make to ensure the process will go smoothly when the time comes.
- Review last year’s tax return. If your deductibles and expenses are similar this year, having a record of them will make this year’s filing simpler and faster. Checking your most recent return will also help you recognize any changes that you may need to note for the 2017 tax year, like the opening of a new investment account or beginning a new job.
- For those who have moved within the last year, it is a good idea to contact your previous employer, bank or any other institution that you may be expecting documents from to confirm that your mailing address is current.
- Create a checklist of specific documents required to complete your return and update it as the paperwork comes in.
- If planning to itemize, compile your receipts for business and travel expenses, as well as any charitable donations you may have made.
- Since more and more organizations are leaning toward electronic documentation, like student loans, monitor your online accounts as some organizations may no longer mail out paper copies.
- Unfreeze your credit. If you initiated a credit security freeze after the Equifax debacle, you will need to contact Equifax and request a temporary freeze removed to allow the IRS to confirm your identity.
Monitor your tax record. Though setting up access is an exhausting process, the IRS offers online access to individual tax records, which lets taxpayers view their tax account activity. With this access, you could see if someone else has filed a return under your name, allowing you to dispute the return immediately; however, the process of signing up for access is complicated and requires excessive personal information, so fewer than half of the individuals that begin registration for access finish it.
Request a PIN.The IRS offers taxpayers an identity-protecting PIN that is supposed to deter tax identity theft by requiring a six-digit ID number in addition to one’s Social Security number in order to file a return. Once issued, any return filed without the PIN will be rejected, but you may only apply for a PIN if the IRS has invited you to do so, and invitations are generally only sent to individuals who have experienced some form of tax-related identity theft in the past.
Be aware of signs of fraud. The IRS reports that some individuals have received fraudulent tax documents and notices, like 1099 forms from jobs they’ve never held, or CP2000 forms requesting the verification of unreported income. These notices can indicate that you have been targeted for attempted tax identity theft. Knowing what to look for can help you avoid such hassle.
Though that feeling of unease may linger throughout tax season, it’s comforting to know that the IRS is making strides in combatting tax identity theft. By taking measures of your own, you can further ensure that your potential refund and your identity, remain your own.
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