The Internal Revenue Service announced on Monday that cyber-thieves may have hacked 334,000 taxpayer accounts, three times as many as the IRS had stated earlier this year.
While it’s still unclear what information was actually stolen, and exactly whose accounts were compromised, we do know that the thieves may have accessed Social Security numbers, birth dates and street addresses.
The IRS says it will begin mailing letters in the next few days to about 220,000 taxpayers in cases where hackers may have had possible or potential access to taxpayer account information.
Another 170,000 households will receive a letter alerting them that their personal information could be at risk even though identity thieves tried but failed to access their IRS computerized accounts.
Here’s what you should know about this latest hack:
How will the IRS help affected taxpayers? The IRS will be offering them free credit protection as well as Identity Protection PINs. The Identity Protection PINs are tools to help safeguard your 2015 electronic tax returns in the event they’re targeted by cyber-criminals. In fact, the IRS believes some of the hacked information was stolen so criminals could file fraudulent tax returns during the upcoming filing season.
What should you do if you receive a letter? Make sure to take the IRS up on its offer of free credit protection and the six-digit Identity Protection PINs. You can’t file a return without the PIN, and it’s replaced every year. It’s also important to review bank, credit card and brokerage accounts monthly to look for any unauthorized or unfamiliar transactions. Make sure to check your credit record periodically to make sure no one else is accessing credit in your name. If you receive a letter from the IRS saying you were a victim, don’t ignore it. Take action.
What else should you do to protect yourself? Clients are asked to call and alert us if they receive an IRS warning letter. On many occasions, we’ve been able to implement special and immediate anti-fraud measures to keep your brokerage accounts safe, even when a credit or bank account has already been hacked. We can also advise you of possible “next steps,” such as alerting the appropriate credit bureaus or government agencies.
Clients should also be aware of Schwab’s Security Guarantee under which Schwab will cover 100% of any losses in any of your Schwab accounts due to unauthorized activity. Charles Schwab is, of course, the primary custodian used by our firm to safeguard client assets.
How exactly does tax identity fraud work? The identity thief uses a legitimate taxpayer’s identifying information, often captured during a hack, to file a fraudulent tax return and claim a refund. Then, when you go to file your true return, you learn someone has already filed in your name, stealing your refund. It could take 6 months or more to resolve your case and claim your rightful refund.
Is tax fraud really such a big deal? Yes. The IRS paid out an unbelievable $5.8 billion in fraudulent refunds in 2013 alone, although it estimates it was able to detect and prevent another $24.2 billion in additional fraudulent requests that same year. It says it’s looking at several methods to improve taxpayer authentication, but is hindered by “hundreds of millions of dollars in budget cuts.”
Want to know more about protecting yourself from identity fraud?
- Check out our article on “9 Tips To Protect Your Brokerage Account Security.”
- Super security conscious? Wall Street Journal reporter Laura Saunders writes that you can obtain a PIN even if you’re not a tax fraud victim. “Starting this year, an IRS pilot program is giving PINs to people who filed federal returns as residents of Georgia, Florida and the District of Columbia last year. (These are the areas with the highest percentage rate of tax identity theft.) To get one, apply at www.irs.gov.”