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What Equifax means for tax fraud

January 09, 2018

For most of us, New Year’s resolutions include goals such as starting a new exercise routine or traveling to someplace on our “bucket list.” This year, you should consider an alternative resolution: file your income taxes early. Thanks to the 2017 Equifax data breach, there’s a higher chance that an identity thief might file your taxes in your name, steal your refund and/or get you in trouble with the IRS. With the names, addresses, Social Security numbers, and financial account numbers of over 145 million Americans exposed in the breach, criminals could have a field day this tax season.​

If you live in Florida, Georgia, or Washington D.C., you can participate in a government pilot program and get a PIN number to use when filing your tax return. Without the PIN, your tax filing will be rejected, so no one will be able to impersonate you with the IRS. Unfortunately, if you live in other states, you can currently only get a PIN number if you can prove you’ve already been a victim of identity theft. If you set up a credit freeze after the Equifax breach, you’ll also need to have the freeze temporarily lifted so the IRS can verify your identity before issuing a PIN.​

The best defense against tax-related identity theft is to file your tax return as early as possible. You should receive most of your tax documents by the end of January, although a few, such as 1099 forms for health savings account (HSA) distributions could arrive as late as mid-February. You can use end-of-year paystubs and online reports from financial institutions to start preparing your taxes while waiting for the official documents. Even if you’re not expecting a refund doesn’t mean you’re in the clear from tax fraud. Cyber criminals are not using your real income and expense numbers to file a fraudulent tax return, they are filing to get a refund.​

In the meantime, watch for any signs of suspicious activity. For example, if the IRS sends you a form to verify unreported income, it can be a sign that someone filed a bogus tax return in your name. If you’re really concerned, you can sign up with the IRS for the ability to monitor your tax account online. (The signup process is reported to be challenging, but once you have the account set up, you’ll have an ongoing way to monitor your tax records.)​

If you file your taxes and discover an identity thief got there ahead of you, don’t despair. You can file an affidavit with the IRS to have your tax account corrected. But the best strategy is to file as early as possible and beat the bad guys to the cash. Filing taxes early isn’t a fun resolution, but if that nice refund check is going to pay for that dream vacation, making sure you get it on time is a small sacrifice. ​

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