Equifax Breach! What it Means for your Taxes.
How the Equifax Breach May Affect You
Unless you’ve been living under a rock for the past four months, you’re probably well aware of the massive Equifax data breach that was disclosed in September 2017.
This breach impacted millions of Americans, exposing all kinds of personal details and bringing questions about credit bureau security, the manner in which companies collect and store data without consumer input and other privacy-related concerns. While many were, understandably, focused on the immediate risks as well as the fiasco surrounding the free credit monitoring and identity theft protection offered by Equifax as compensation for its blunder, others looked toward the not-so-far future and wondered what would happen when tax season rolled around. Would instances of tax identity theft increase?
How can people protect themselves if they were part of the more than 143 million exposed?
What does the Equifax breach mean for the 2018 tax season?
Here’s what you need to know about tax season post-Equifax.
As many, including the IRS, warned back in September when news of the Equifax breach and its enormity came to light, the breach put millions of people’s tax refunds in jeopardy. Identity thieves thrive during tax time, as they can use information gleaned from phishing attacks, stolen data purchased off the Internet black market and other sources to file fraudulent returns.
The goal is to beat the legitimate taxpayer to the punch and get a refund in their name. Though instances of attempted tax fraud fell last year, thanks in part to stepped up efforts by the IRS and states to identify and prevent the issuing of fraudulent claims, it’s possible that the Equifax breach could lead to an increase in attempts this year. It exposed the personal information, including details most sought-after by tax identity thieves like social security numbers, of more than 143 million people — that is a huge pool of potential victims, so it’s more important this year than ever for people to be vigilant and brush up on their security knowledge.
Adults aren’t the only ones at risk from tax identity theft
While you might not think about your children when it comes to tax identity theft, you should. According to a 2011 study conducted by Carnegie Mellon University, the rate of child identity theft is 51 times higherthan adults. Children make excellent targets for identity thieves because it’s not common for anyone to be checking to see if there are any accounts or other activity on their credit reports — especially considering they shouldn’t even have credit reports until after they come of age. Because of this, it is all too easy for a child’s social security number and information to be used and abused repeatedly without them or their family being any wiser until it’s too late and the damage has been done.
This year, an uptick in sales of infant’s social security numbers has been noted on some black market sources, which goes to show how desirable “clean” personal data is to criminals. While the Equifax breach victims were, as far as we know, all ages 18 or older, other large breaches in recent years like 2015’s Anthem breach have exposed the details of children and adults alike. It’s important to look into what you can do to protect your kids, like placing a fraud alert or credit freeze on their credit files.
The IRS has instituted additional safeguards in preparation
The good news is that the IRS is not asleep on the job!
The agency reminded consumers in December that a new law approved by Congress requires that tax returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit must be held until mid-February. This gives it more time to check for fraud, though it means that refunds may be delayed for many people. Additionally, all official federal W-2 forms used to file taxes in 2018 will contain a verification code box, and approximately 66 million Americans will see a 16-character code on their W-2’s that can be entered into this box to help confirm their identity. Thanks to a joint partnership between the IRS, states, tax preparation companies and others to share data, more effort has been put in to learn the indicators of fraudulent filing so it can be stopped in its tracks.
What steps can you take to protect yourself (and your refund)?
Unfortunately, you can’t completely prevent identity theft, and tax identity theft is especially difficult to detect before it happens, since the way most people find out is when they attempt to file their return and it’s rejected.
That said, you can do some things to protect yourself and make the possibility of being impacted by this crime less harmful.
1. File as early as possible.
While sometimes you might have to wait until after the official open date for filing because you’re missing an important document like your W-2 or a 1099, it’s important to be ready so you can file as soon as all the necessary documentation is in order. Putting off filing your taxes is something that many people are tempted to do, either because they don’t want to deal with the headache, or because they’re afraid of owing the government money. Sometimes, it’s a matter of plain forgetfulness. Whatever the reason, the longer you wait, the more time you give an identity thief to file a fraudulent return on your behalf.
2. Protect your data.
Follow smart cyber security when filing online, such as using a secure connection instead of your local cafe’s free Wi-Fi, and make sure you set strong passwords on all accounts associated with filing your taxes — including your email account, tax preparation service login and anything else you use (e.g., cloud storage) to get the job done. Phishing attempts as well as other scams, like phony phone calls, tend to increase during this time, so be on the lookout for suspicious messages that could be attempts to social engineer information out of you or get you to unknowingly hand over your data.
Finally, don’t forget about the potential for real-life data theft; lock up forms securely instead of leaving them in plain sight, and keep a close eye on your mailbox while you wait for tax forms to arrive (especially if it’s accessible without a key).
3. If you haven’t already frozen your credit, do it.
While this isn’t going to stop someone from filing a fraudulent tax return using your information, it can serve to prevent them from doing other nefarious things with your data — like opening up new credit cards or utilities accounts in your name. Placing a freeze on all three of your credit reports will help ensure that nobody can apply for new credit in your name; though it’s important to note that you’ll need to get the freezes temporarily lifted if you decide to apply for a loan or rent an apartment. Learn more by reading our comprehensive guide to freezing your credit.
4. Get to know the resources available to you.
Like stocking an emergency kit to prepare for a natural disaster, you can get to know the various websites and tools which will help if you do have a problem this tax season, that way you’ll be in the know if the worst should occur. You can learn all about tax identity theft by reading through our archive of blog posts on the topic at y2kcreditsolutionns.com, as well as perusing the IRS website itself.
For more information please do not hesitate to call us 516-568-4541.