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Equifax breach could bring long-term tax woes

Earlier this month, consumer credit giant (and one of the “big three” reporting agencies responsible for evaluating the creditworthiness of millions) announced a massive data breach. Hackers infiltrated the company’s databases, compromising confidential information of an estimated 143 million Americans.

The information accessed in the hack includes names, birthdates, social security numbers, addresses and debt account information. Of course, this vital information is more than sufficient for a criminal to commit identity theft.

Equifax has offered free credit monitoring to those affected, and has temporarily lifted the fees for instituting credit freezes. Financial experts have advised that those whose data was accessed should regularly monitor their credit reports (the federal government provides annual reports from Equifax, Experian and TransUnion free of charge at the https://www.annualcreditreport.com/index.action website).

The IRS has gone one step further, however. They are advising that all taxpayers be on heightened alert for the very real possibility of employment fraud or tax return fraud.

Identity issues impacting tax returns

Though there is a constant, ongoing list of prevalent schemes and scams affecting taxpayers, the two ones in particular that could arise as a result of the Equifax breach are employment fraud and tax return fraud.

  • Employment fraud: using stolen vital information (name, birth date, SSN, etc.), a scammer could seek employment in another person’s name. This could be associated with other criminal activity, like illegal immigration, fleeing an arrest warrant or money laundering.
  • Tax return fraud: illegally obtained information can also be used to create and submit fake tax returns. This is primarily for the purpose of obtaining refunds that should belong to the original taxpayer, but can also be for money laundering, hiding income, taking unearned deductions/exemptions/credits and more. 

If you suspect you have been a victim of tax fraud, don’t wait to act. You need to take steps to restore your identity, both with the IRS and state tax authorities. You could be under investigation or audited before you realize what has happened. Having an experienced tax attorney at your side can help you get the matter resolved and get your good name back.

 

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