Filing Taxes in the Wake of the Equifax Breach

Last summer’s Equifax data breach is estimated to have impacted more than 145 million Americans.

Vital personal information such as social security numbers, birthdays and addresses were stolen from the credit bureau, which blamed the incident on both human error and technical failures.

Whatever the exact cause may have been, the breach has the potential to create immense headaches for Americans, particularly now as tax season approaches, because of the type of information that was taken.

With social security numbers, addresses and birthdays in the hands of identify thieves, Americans need to be particularly on guard for tax fraud.

Here’s what you can do to be proactive about preventing tax fraud if your information was compromised by the Equifax breach.

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File Your Taxes Early

Procrastinating on your taxes this year is a bad idea. As painful and tedious as tax preparation may be, delaying the inevitable could lead to more trouble down the road.

“To avoid being a victim of tax fraud, consider filing your tax return early, thereby beating a potential fraudulent tax return to the IRS,” explained Paul Joseph, founder of Joseph & Joseph Tax and Payroll in Williamston, MI. “If you’re aware that your information has been compromised by the Equifax breach, prepare your information so that you can file as quickly as possible.”

It’s possible to file early even if you do not have all of the income documents needed to complete a return, explained Joseph. Use your 2016 tax information as a basis for filing 2017. Then, once all of your 2017 documentation becomes fully available, you can amend your return.

“Doing this will require you file two tax returns,” added Joseph. “I only suggest doing this if you were part of the Equifax breach.”

Get a PIN Number from the Internal Revenue Service

Yet another proactive measure you can take this year is to apply for a personal identification number (PIN) from the IRS, which must be used when filing your taxes.

You can obtain a PIN by completing IRS Form 14039, which is an identify theft affidavit. The form is available for download from the IRS website.
“The PIN is helpful because the number assigned by the IRS must be placed on an electronic tax return in order to file the return with the IRS,” said Joseph. “In the event that the tax return does not have the proper PIN number, then the IRS will reject the filing allowing the true owner to file the return with the proper pin number.”

For its part, the IRS has also implemented many new safeguards to help prevent tax fraud, including requiring new log-on standards for those who prepare their own tax returns with tax software.

Sign Up for IRS Transcript Service

Another way to monitor your tax records with the IRS is to sign up for its transcript service.

The agency provides a variety of transcripts including tax account transcripts; record of account transcripts; and wage and income transcripts, among others. Each category provides slightly different information regarding your past and current filings. The transcripts can be accessed online or the IRS will mail them to you.

Signing up for the program requires providing your social security number, date of birth and other personal information.

Work with a Reputable Tax Preparer

As tax season nears, a variety of fly by night tax preparation offices begin to spring up on every street corner.

Do yourself a favor and work with a true professional, says Christopher Jervis, president of Georgia-based Lone Wolf Financial Services.

Taxpayers can search the IRS website for credentialed tax professionals in their community, Jervis pointed out.

“While this is not an endorsement by the IRS, and it does nothing to certify the skills of the preparer, it is at least a starting point,” said Jervis.

In addition, make sure the preparer you choose has a PTIN or Preparer Tax Identification Number and is signing the tax return as the preparer (as opposed to marking them “self-prepared.”)

And while you are at it, make sure the preparer you work with is using professional tax software and not consumer software.

“The professional software has more stringent due diligence and ID questions,” said Jervis.

What If Someone Filed a Fraudulent Return in Your Name

If you attempt to file a return and it’s rejected, chances are someone has already fraudulently filed a return, said Joshua Zimmelman, president of New York-based Westwood Tax & Consulting

If this happens, contact the IRS Identity Protection Specialized Unit and complete Form 14039. You should also file a complaint with the FTC at identitytheft.gov and contact the three major credit bureaus to place a fraud alert on your credit records.

More Signs of Fraud

It goes without saying that identify thieves have a variety of tricks up their sleeves. And there are various ways that their attempts to file returns in your name may become apparent, said Zimmelman.

“If you received a letter from the IRS asking you to verify that you’ve filed your return, and you haven’t, then you’ve probably been a victim of identity theft,” Zimmelman said.

If you’ve received a W-2, 1099, or other document from an employer that isn’t your employer or about income earned that isn’t yours, then someone may be using your social security number or contact information without your consent, Zimmelman added. If this happens, contact the IRS immediately.

And finally, if you’ve received a tax transcript that you did not request, this might also be a sign that someone is trying to steal your information, so once again, contact the IRS immediately to protect your data.

If you’re concerned about your credit being affected by identity theft, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get two free credit scores updated every 14 days.

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