Credit giant Equifax, one of the three main credit reporting agencies, recently revealed a massive data breach that occurred earlier in the year. Hackers got through the company's electronic security protocols and into databases full of confidential information. Conservative estimates put the number of affected Americans at a staggering 143 million.
The information accessed in the hack includes:
- Social security numbers
- Tax identification numbers
- Debt account information (mortgages, credit cards, etc.)
Obviously, the breach of such key info could easily lead to identity theft.
Equifax set up a website for the incident, now offers free credit monitoring services to the affected taxpayers, and allows people to freeze credit reports free of charge. Financial experts suggest those personally regularly check their credit reports to catch possible identity theft sooner rather than later.
The IRS reports another potential threat from this huge data breach: the possibility of employment fraud and tax fraud.
How identity theft can impact tax returns
The IRS maintains an ongoing list of common scams affecting taxpayers (phishing, fraudulent phone calls or emails, etc.). It now advises people to look out for employment and tax return fraud directly relating to the Equifax hack.
- Employment fraud: scammers sell off stolen information (names, birth dates, social security numbers, and taxpayer identification numbers) to facilitate employment fraud. Such information allows illegal aliens or people evading criminal charges or arrest warrants to gain employment.
- Tax return fraud: criminals create fraudulent tax returns using stolen information for the purposes of obtaining refunds intended for the original taxpayer, laundering illicit funds, hiding assets/income, and for taking improper credits, exemptions or deductions.
If you suspect your identity is compromised, take action as soon as possible. This might help you avoid victimization in terms of tax fraud, employment fraud and financial ramifications. It's possible that investigations or audits are underway before you even know there's an issue. If that is the case, working with a skilled tax attorney is key to getting the matter resolved while minimizing potential consequences.