Tax [Fraud] Season

Once the calendar year turns over thoughts of filing taxes begin. So do the warnings of tax fraud and prevention tips. Having been the victim of tax fraud I know the inconvenience of proving your true identity to the IRS; now having to file under a number rather than your true name. As the digital world expands, so does tax refund fraud. It’s a good bet that you know someone who has been a victim or that you, yourself, are a victim.

Theft

Most people will file their tax returns electronically, either themselves or through a tax preparer. It’s quick, it’s easy, you get your refund faster. Unless you get an error saying that you have already filed. You’re first reaction is that there is a mistake, but you soon realize that you have been the victim of identity theft. Someone has obtained your name and social security number and filed your taxes on your behalf.

It may not have been a direct theft in the classic sense. It could have happened during an electronic data breach of a larger scale or someone hacked your computer, any number of ways. Your information is uploaded to the dark web (it’s a real thing that criminals use to conduct their business or exchange information) and resold many times. The criminal then fills out an electronic tax return with your information and bogus financial information and has the refund sent to a direct deposit or PO Box. The IRS does compare information against past filings but that doesn’t occur until well after the refund has been issued. Software is in place to try and stop fraud, but, again, the refunds are issued so quickly it happens before any alarms go off.

You then have to go through an arduous process to prove yourself to the IRS, file the fraud report, and wait for the IRS to investigate your claim. If they find that you are a victim they will then issue your return and assign you an identification number to use for future filings. The whole process takes several months. Other than the waiting, it really wasn’t an unpleasant experience and the refund was issued in a timeframe shorter than expected. It’s also interesting to request a copy of the fraudulently filed return from the IRS. You get to see what deductions your other self made and the amount some PO box received.

Prevention

One school of thought of being susceptible to fraud is filing returns late in the season, near the April 15 deadline. This gives the criminals time to file their fake returns and receive the refunds before you file. Tax regulators say to file early to get a refund as quickly as possible, thus beating the criminals to your money. States have even made the effort to streamline the process so that refunds are received as quickly as possible after the return is filed.

Law enforcement doesn’t comment on the timing of the filing, but rather to delay the issuance of the refund so that fraudulent returns can be identified.  At a recent tax security summit, the U.S. Attorney for Maryland, Rod Rosenstein, commented from the panel, “The quicker you are on paying refunds, the greater the risk of not finding fraud.”

Hawaii, Illinois, Louisiana, Minnesota, Montana, North Dakota, South Carolina, and Utah are some of the states that are slowing returns to further prevent fraud. Maryland issues refunds within two days of receipt of the return. The comptroller’s office relying on analytical software to detect digitally filed fraudulent returns. Additionally, Maryland will not issue refunds until the comptroller’s office has a W-2 on file. With these methods in place the comptroller’s office hopes to combat fraud while at the same time efficiently serving the taxpayers.

The Maryland legislature this year is considering a bill named the Taxpayer Protection Act of 2017. This bill would give the comptroller’s office broader authority to build criminal cases against fraud and extend the statute of limitations for prosecution to six years.

There is no way to know if your personal data has been stolen. Regarding taxes it is best to file early. If you do become a victim, report it to the comptroller’s office and IRS as soon as you are aware. Document everything you do and who you speak to. Secondarily, begin looking into your banking and credit cards as they may have been breached as well. Review statements and set up alerts.

Be sure to read our others posts related to identity theft.

Keys to the vault August 26, 2015

There's been a breach February 18, 2015

Taking your identity on vacation June 17, 2013

Verified to work within the U.S.

Some relate identity theft with the actual assumption of your name and personal data. Living a carefree life under your name, sticking you with all of the debt. But there are several ways your identity or even parts of it can be used fraudulently.

Having the pleasure of someone else file your taxes takes out all of the stress. When it’s a trusted professional it gives you peace of mind. When it’s a complete stranger who also accepts your refund on your behalf, it’s frustrating to say the least. Not long ago we were among the hundreds of thousands of victims of tax refund fraud. You file your taxes electronically and it gets rejected because someone else has already filed. You don’t know how your data was compromised or why the IRS accepted such an oversimplified return that is out of character with years of your own filings, but it happened. The IRS doesn’t figure out who is the real you, you have to prove it.

You go through the IRS process of identifying yourself and after a few months you are good to file again, except now you have to use a special PIN. Due to your social security number (SSN) being compromised, you can no longer use it to file.

Job search

Probably everyone reading this has been the victim of some level of identity theft. Whether it is credit card skimming or tax refund fraud, with very little information someone can take your identity. Depending on the level, the fixes can be arduous. Prevention is easier. File your taxes early. Monitor your credit scores and your accounts. You can increase the security on credit card accounts, opting for notifications when someone accesses your account. Be mindful of how and when you use your credit card, but these are financial issues. If your SSN has been compromised, you may also be applying for jobs that you are not aware. 

A lot of systems are still set up to identify you through your SSN, one of those being employment. Not only can your, now compromised, SSN be used to get tax refunds and buy merchandise, it can also be used by someone to apply for a job. If you’re not collecting social security you may not know your identity has been stolen is this manner. This type of SSN fraud is more prevalent with illegal aliens who use their own name but a stolen SSN. It is estimated by several sources that over seventy-five percent of illegal aliens use fraudulent SSNs to obtain employment.

EVerify

EVerify is an Internet based system that compares an employee’s personal data with data from the U.S. Department of Homeland Security and the Social Security Administration records to confirm employment eligibility. Basically, is the employee legally within the U.S. and is the information provided not being used fraudulently. EVerify is administered by the U.S. Citizenship and Immigrations Services (USCIS). USCIS have created, within the EVerify system, a new service called myEVerify. myEVerify allows the user to monitor the use of their social security number within the EVerify system. EVerify is used by employers…myEVerify is used by workers.

Not having afforded myself this level of SSN protection, I decided to take it for a spin. The process took about five minutes and wasn’t that painful. In addition to the normal web account setup process, you must also go through a series of identification questions. An added level of identification verification is an “identification quiz” that further confirms your identity. One can tell from the questions asked that the personal identifiers provided in the account setup process are checked against financial and public databases to generate the questions. This is all done to ensure that the person setting up the account is, in fact, you. A side benefit of establishing the account is verification that you are approved to work within the U.S. At least, you should get this verification. Once your account is created you can perform self-checks to see if your SSN has been used for employment, check the status of any EVerify cases you may have, and lock your SSN.

Locking your SSN

Locking your SSN basically freezes your SSN so that someone else cannot use it for employment purposes.  If you wish to lock your SSN, login into your account and click on Self Lock. You will go through a level of identification and security questions before the process is complete. Again, all to ensure that you are the one performing the action.

Locking your SSN also locks you out. If you will be seeking employment after you lock your SSN you will have to login to your account and unlock the SSN. As with the locking process, unlocking will require you to go through a series of security features. Each step of the above processes seemed to be followed by confirmation and notification emails.

Criminals will make use of what they are offered. Be it a credit card number, your name and address, your birthday, or all of your personal data. Locking your SSN from being used in the EVerify system is yet another action you can take to attempt to protect yourself from identity theft.

The myEVerify site can be found through this link.

https://www.uscis.gov/mye-verify

Checkout our blog archive for other posts relating to identity theft:

Taking your identity on vacation-June 2013

There’s been a breach-February 2015
Keys to the vault-August 2015