Tags: tax refund | fraud | identity theft | swiped

Still Don't Think Your Tax Refund Will Be Stolen?

Still Don't Think Your Tax Refund Will Be Stolen?

A neon sign that reads 'Electronic Filing Fast Refunds' is seen in a window of a tax preparation office late-night April 13, 2006 in Des Plaines, Illinois. (Tim Boyle/Getty Images)

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Monday, 27 February 2017 04:50 PM Current | Bio | Archive

A few years ago Ars Technica, the technology news website, hosted a hackathon of sorts. A team was invited to crack 16,449 passwords. They were able to figure out 90 percent of them in less than an hour. Six passwords a minute were cracked, including 16-character puzzles like qeadzcwrsfxv1331.

The connection? Tax identity theft. And don’t say it… I know what you’re thinking: It’s a bit late to be warning people about this, right? Wrong.

According to the second annual Tax Season Risk Report, conducted by my data security and identity theft protection firm, Cyberscout, despite all the warnings about the tax identity theft crime epidemic, 57 percent of consumers will file in March, April, or later, giving tax fraudsters plenty of time to impersonate them online and steal their refunds.

It’s Still a Problem

While it is true that the trend is downward, there’s still a risk.

It may seem like the coast is clear. Compared to the same nine-month period in 2015, last year saw a 50 percent decline in the number of reports filed by consumers about tax-related fraud. It was a precipitous decline — 512,278 to 237,750 — made possible by government and consumer awareness programs.

The IRS reported a similar drop in the number of confirmed tax refund theft cases — almost fifty percent — from 1.2 million to 787,000.

The only truly bad news: a 400 percent increase in phishing and malware incidents pointed at the commission of tax fraud during the 2016 tax season, something I covered in detail recently.

Feeling lucky? Even if there are only a half million incidents of tax refund fraud this year, do you really want to take the chance that you will become a victim?

According to the Cyberscout report, more than half of Americans aren’t worried enough about the threat of tax identity theft to take the extra precautionary measures necessary to protect themselves.

Lottery Mindset

A little more than 140 million tax returns were filed last year. Ninety-one percent of them were e-filed via networks protected by ever-so-crackable passwords. So, for the sake of this illustration, there were 126 million tax returns that could have been converted into scam artist gold, and only 787,000 of them were (that we know about). With a roughly 1 in 130 million chance of winning, we’re in lottery land.

Did you play Powerball when the jackpot was more than $400 million?

Let’s go back to that Ars Technica challenge. The odds were decidedly different. Ninety percent of the passwords attacked were cracked. As with all forms of identity theft, getting “got” is a matter of bad luck.

The Cyberscout report found the following:

  • 58 percent of Americans aren’t worried about tax fraud.
  • Only 35 percent of taxpayers demand that their preparers use two-factor authentication, which is far more secure than a single password, to protect their clients’ personal information.
  • Less than 18 percent of those surveyed use an encrypted USB drive, a secure way to save important documents like tax worksheets, W-2’s, 1099’s, or 1040’s.
  • 38 percent either store tax documents on their computer’s hard drive or in the cloud.
  • More than half of consumers will file in March, April, or later, giving tax fraudsters time to impersonate them online and steal their refunds.
  • 51 percent of taxpayers who expect a refund check in the mail do not have a lockable mailbox, putting their check at risk of theft.
  • Half of all taxpayers don’t know if their tax preparer is doing everything possible to secure their data from theft, or have even properly vetted their tax preparer to make sure he or she is legit.

Your odds of “winning” the tax identity theft lottery increase with the number of vulnerabilities you allow to exist around you.

As discussed, passwords are not failsafe. With less than half of the population not using two- or more factor authentication, the fact remains that becoming the victim of tax identity theft is really just a matter of bad luck. Depending on the precautions you take, you are always in a position to get “got.”

Remember the old saw about bear encounters? If we meet one in the woods, I don’t need to outrun it, I just need to outrun you. The same goes for personal cyber security. If you do everything possible to protect yourself from the bad guys, most likely they will move on to an easier target.

As ever, follow the three M’s discussed in my book, "Swiped: How to Protect Yourself in a World Full of Scammers, Phishers and Identity Thieves." Minimize your risk of exposure, monitor your accounts and your personal identity, and know how to manage the damage if you are the victim of an identity-related crime.

If the worst happens, call your insurance provider, financial services institution, or the HR department of your employer, since they often offer low-cost or free identity protection and monitoring services to safeguard and restore stolen identities.

But save yourself the trouble, and make yourself harder to get.

Adam K. Levin is a consumer advocate with more than 30 years of experience and is a nationally recognized expert on security, privacy, identity theft, fraud, and personal finance. A former Director of the New Jersey Division of Consumer Affairs, Levin is chairman and founder of CyberScout and co-founder of Credit.com. Levin is the author of Amazon Best Seller "Swiped: How to Protect Yourself in a World Full of Scammers, Phishers, and Identity Thieves." Read more of his reports — Go Here Now.

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AdamLevin
A little more than 140 million tax returns were filed last year. Ninety-one percent of them were e-filed via networks protected by ever-so-crackable passwords.
tax refund, fraud, identity theft, swiped
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2017-50-27
Monday, 27 February 2017 04:50 PM
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