Tax Refund Season is ID Theft Season: IRS PIN System Fails

The April 15th tax filing deadline means it’s open season for tax refund thieves. Each year, hundreds of thousands—if not millions of taxpayers become victims of tax refund identity theft—many of them for two years’ running. Those who file regular tax returns and typically get annual tax refund checks aren’t the only people at risk of tax refund ID theft. Would you believe that tax refund ID theft can happen to those who don’t even need to file a tax refund? Are you surprised to learn that tax refund thieves are targeting people who don’t even have a refund coming? As scammers seek to profit from their deviousness, IRS attempts to protect taxpayers have been flawed, at best.

Tax Refund Theft

You may be thinking that there’s no hurry to get your tax refund filed, especially if you are getting little or no refund. You couldn’t be more wrong. Here’s a little insight into how scammers do their dirty work. They get a hold of your social security number, address, date of birth, and other identifying information and file your tax return before you do. Crooks claim your refund and have it sent to an account or address that you don’t control. You won’t discover it until you file your return and the IRS rejects it as a duplicate.

After the IRS had discovered that hundreds of thousands of tax returns were filed fraudulently, they acted quickly to protect taxpayers. Tax refund victims were sent an Identity Protection PIN along with instructions to send their six-digit PIN along with their tax return to ensure that the return was valid. While it sounds like a viable solution in theory, once again, it didn’t take scammers long to hack the PIN system.

IRS PIN System Hacked

Usernames, passwords, PINs—citizens have been inundated with complicated login protocols for every virtual transaction, making it difficult to remember if it was all lowercase or of it requires an uppercase letter and a special character. Unless you are diligent about keeping track of passwords, you might lose that all-important six-digit PIN that the IRS assigned to you to protect your identity. The IRS devised a way for PIN recipients to easily retrieve their PIN, failing to consider that anything that is easy for the general population is also easy for scammers. The erroneous system allows you to gain access to your PIN by answering four easy-to-guess questions from the consumer credit bureau, Equifax. Hackers are quite proficient in getting personal information about you by doing a few, fast and simple Google searches. They uncover your address, previous address, phone number, email address, loan amounts, and other information. Using sites like the ever-popular Zillow and Facebook, hackers can find out enough information about you to make quick work of answering those four easy questions.

If it was easy enough to steal your personal identifying information and your tax return the first time, it’s just as easy to steal it a second time, exposing continued risk for victims of tax refund identity theft to having their second tax refund stolen. Once again, the IRS set to work to deter tax refund thieves. They decided to send a new PIN annually to tax refund victims. Sadly, this doesn’t work that well either. Scammers are using the same personal information that they stole from the first tax return refund, breezing through the security questions, and gaining access to the new PIN. Past tax refund victims are surprised to find that the new PIN system has also failed to protect them, as promised by the IRS when they find the second tax refund has also been stolen.

The IRS mails new PINS just before tax season, so if you are a prior victim of tax refund fraud, the sooner you file your tax return, the less time hackers will have to steal your identity, along with your refund. The IRS continues to seek a secure solution to tax refund theft. In the meantime, it’s wise to monitor your financial accounts and credit report for suspicious activity. Remember, those who don’t file returns and don’t expect to get refunds are equally at risk.

Admittedly, the IRS doesn’t have a fool-proof way to protect your tax refund at this time. Take steps to protect yourself and don’t leave the full responsibility in the hands of the government. In addition to filing your tax return promptly and monitoring your credit lines for suspicious activity, do a Google search for your own personal information. Taking a few steps to block personal information from internet sites and postings gives the scammers far less personal information to use.

Take a look at our list of the top ID theft insurance companies if you’re looking for an extra layer of protection.

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