Article by CSH’s Fred Francis
Identity theft cases involving individual tax returns have been on the increase. It is estimated that tens of billions of dollars from both the federal and state taxing authorities have been fraudulently refunded by the Internal Revenue Service, and the thieves don’t seem to be slowing in their pursuit of more.
The information used to obtain these refunds is typically gathered through data breaches at retail, banking or other organizations. Recent data breaches have included companies such as Target and Blue Cross & Blue Shield.
Last week the IRS announced that it too experienced a data breach – one in which the hackers gained access to approximately 100,000 taxpayers’ personal information through a system called “Get Transcript,” an online service the IRS uses to give Americans access to their past tax returns. The IRS reported that the criminals tried to access approximately 200,000 accounts, and succeeded in about half the cases. This was possible because they already had individuals’ personal data, obtained through non-IRS sources – such as another company’s data breach – which allowed them to go right through a multi-step authentication process.
The information the thieves accessed from “Get Transcript” could be used to file more convincing fraudulent tax returns. The IRS will be mailing letters to all those affected and offering credit monitoring services to those 100,000 taxpayers directly impacted.
To help curb events such as these, the State of Ohio is cracking down on fraudulent attempts at claiming refunds. One method they find effective is authenticating filers’ identifications. To do so, the State of Ohio has begun to randomly mail tax filers an identity confirmation quiz. This tactic is a legitimate fraud prevention tool, but nonetheless, it has caught many tax payers by surprise.
The letter directs the taxpayer to an online website where they need to enter a reference number (found in the upper right hand corner of the letter) and the dollar amount of the requested refund. With this step, it is important to know that if you are not due a refund or owed one, you would need to enter zero.
The quiz then asks for answers to four questions that are pulled from your credit report. In order to pass the quiz, you must answer three out of four correctly. If, on the first time through, you do not answer three correctly, you will be given another chance with four new questions. If at this time you are still having problems, you will need to call the State of Ohio and confirm your identity over the phone.
Responding to the letter in a timely manner is critical, because the State of Ohio gives you only 30 days to confirm your identity or they will not process your return.
If you receive the letter before filing your return, then this is a good sign you have been a victim of tax-related identity theft, and you’ll need to follow these steps:
- Stay calm and realize you are not alone
- Download and complete a State of Ohio Identity Theft Affidavit
- Review your IRS Account Transcripts to ensure that you were not a victim on your federal tax return
- If you notice you were a victim on your federal return, complete a federal Identity Theft Affidavit
- It is also recommended that you pull a credit report and check it for discrepancies:
You can obtain one from all three major credit bureaus in a 12-month period (accomplish this by pulling one every four months).
It is important to remember that if you feel that you may have become a victim, you should take immediate action. This is not something that is easily fixed by either the State of Ohio or the IRS, as the current wait time for a resolution is between six to nine months.
When it comes to your tax needs, the CSH Tax Services Group stands ready to guide you with the right solution, from tax planning strategies, to tax controversy or fraud issues. To discuss this topic or any other, please contact your CSH advisor or request a consultation with a CSH tax professional today.
For further information, please see the resources provided below: