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Watch for these data theft red flags, by tax and other financial crooks

Summer is slipping away, but tax crooks are still hard at work. That's why the Internal Revenue Service and its Security Summit partners are spreading the word about signs of data theft.

The warning from Uncle Sam and state tax officials, as well as the private sector tax community, is aimed at helping tax professionals. That's understandable, since they collect and manage clients' tax and personal data.

If crooks can crack the tax pros' cache, they have what the IRS calls a precious commodity, details on thousands of taxpayers from just a few sources.

The ill-gotten treasure trove then can lead to fake return filings seeking fraudulent refunds. And wider identity theft using the client information.

However, many of the tips on identity theft red flags and how to avoid them also apply in individual taxpayer cases.

Unexpected notices or alerts: All IRS communications are concerning, at least at first. But they also might be signs of ID theft or at least an attempt to steal our identity. That's why the IRS and Security Summit say look out for the following.

You get a notice that an IRS online account was created without your consent. You should be similarly concerned if you get a report that someone accessed your IRS online account without your knowledge, or that the IRS has disabled your online account.

You receive a tax transcript you didn't request.

You get balance due or other notices from the IRS. These are of particular ID theft concern when then they are not correct based on the tax return you filed.

You get a refund without filing a tax return. The days of advance COVID-19 pandemic related payments are over, so this could be a sign that someone has your personal and tax information.

Technical glitches: Tax professionals, most of whom handle clients' tax matters electronically, also should watch out for problems in this area.

Of particular e-tax concern are —

  • Slow or unexpected computer or network responsiveness could be a sign that your system has been hacked or infected with malware. Examples that should cause concern include software or tax transactions taking longer than usual to process, as well as your computer cursor moving or changing numbers without touching the mouse or keyboard. And definitely be worried you're locked out of a network or computer.
  • Client tax returns are rejected because their Social Security number was already used on another return.
  • Tax preparers get IRS authentication letters (for example, 5071C, 6331C, 4883C, 5747C) even though they didn't file a tax return for the client.
  • Similarly, e-file receipt acknowledgements for more returns than the tax pro filed are an indicator of a possible security breach.

Again, these red flags also could apply to individual taxpayers who e-file their own taxes and keep that relevant data on their computers.

Report ID theft immediately: If a crook is able to crack tax pros' and/or their firms' security systems and gain access to company and client data, the IRS says to —

  • Report it immediately to their local IRS stakeholder liaison. Speed is critical. IRS stakeholder liaisons will ensure all the appropriate IRS offices are alerted. If reported quickly, the IRS can take steps to block fraudulent returns in the clients' names and will assist tax pros through the process.
  • Email the Federation of Tax Administrators at [email protected]. They will provide guidance on reporting to state tax agencies. Most states require that the state attorney general be notified of data breaches.
  • Let your clients know of the security issue and that they could have been impacted. Suggest appropriate actions, such as obtaining an Identity Protection Personal Identification Number (IP PIN) or completing Form 14039, Identity Theft Affidavit, if applicable.

The IRS also has more on its special web page Data Theft Information for Tax Professionals.

Individual taxpayers, either personal or business, also should report any type of suspected scam message. Questionable unsolicited emails should be sent to [email protected].

The IRS says you can simply forward the message, but it helps cybersecurity experts more if you send the full email header to help them identify the scheme. The Report Phishing and Online Scams page provides complete details.

You also can report scams to the Treasury Inspector General for Tax Administration (TIGTA) or the Internet Crime Complaint Center. The Federal Communications Commission's (FTC's) Smartphone Security Checker is also a useful tool against mobile security threats.

If you are an identity theft victim, check out the IRS' Identity Theft Central, as well as the FTC's

And you always can review the ol' blog's alerts and tips on identity theft schemes and tax scams

Not just tax targets: Finally, taxes aren't the only identity theft target. I've recently received warnings from my bank and credit card issuers of increasing criminal efforts to target digital money movement channels.

As with taxes, identity thieves looking to illicitly gather data often impersonate well-known financial companies. Common fake ploys tell targets that their accounts have been compromised. They typically request payments to help solve the fraudulent problem by popular money transfer services, such as Zelle, Apple Cash, and Venmo.

A new, at least to me, security challenge involves verification codes. Most of us use these randomly issued numerals to confirm account logins. But if a verification code pops up on your computer or digital device screen for seemingly no reason, beware. The unexpected stray security code probably means a hacker has your login name and password and is trying to sign into your account.

Your first move is to change the password for the account being referenced. Make the new one a strong, difficult one to hack. When confronted by super-strong passwords, cybercriminals are known to give up and move on to easier password pickings.

Also let your financial institution, credit card issuer, and/or payment service know of the attempt to take over your account(s). You're likely not the only person being targeted. Notifying the companies can help them work on tracking the identity theft attempt from their end.

You also might find these items of interest:



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