BEWARE Equifax Breach! What Happens Now?

BEWARE Equifax Breach  What Happens Now?

Year-end planning is even more important than ever. After the Equifax breach, some immediate to do lists include:

1.       Fraud alerts

2.       Credit freezes

3.       Monitoring financial accounts to limit the creation of fraudulent activities

It is vital to start thinking ahead to tax season to avoid fake tax returns created under your social security numbers. Credit freezes and monitoring accounts do not prevent tax-related identity theft which according to the IRS’s “Dirty Dozen: List”, is among the top scams. According to Eva Velasquez, Chief Executive and President of the Identity Theft Resource Center advises that taxpayers file taxes early but filing early does not necessarily mean you have to rush and risk underreporting income to later file an amended return. There are cases where taxpayers cannot file early to wait for all of tax related documents to arrive however, the preparation is more about getting organized and noting down any changes such as opening new investment accounts, new loans or change in employment.

How to Prepare:

·         Make a list of documents you are waiting on in order to stay on top of the tax return process.

·         Be proactive when it comes to tracking down a late document and make sure to contact the responsible party.

·         In the case where you have moved, make sure to contact you employers, financial institutions and other entities who will send you key forms to send your documents to the current address.

·         Save and file receipts and records for deductible expenses such as charitable donations or business expenses.

·         Monitor online accounts that upload and posts tax documents.

·         Monitor tax records provided by The IRS’s online access as it lets taxpayers see the details of their account and this is a way you will be able to see if someone has filed a return in your name and be able to take action.

o   Downside: Signing up however is not easy as The IRS require various personal information and the process is strict leaving less than half of taxpayers to successfully register.

What happens if you are already a victim of tax-related identity theft?

-          Adjust your withholding however, if you rely on a tax refund, it will be harder for those taxpayers waiting for the checks to come.

If you are not a victim, safeguards that The IRS has created can still delay your refund. According to the IRS National Taxpayer Advocate estimated that some filters that are used to detect fraudulent returns had false positive rates of over 50 percent. Due to these incorrect selections over 1.2 million tax returns which equaled to about $9 billion dollars in legitimate refunds were delayed for more than an additional 30 days on average.

Best Defensive Moves:

-          Revisit your W-4 – to adjust your allocations – this will allow you to keep more in your paycheck and even out your tax bill. “It is better to wait for $100 to come in than $1,000’ says Andy Mattson, tax partner at Moss Adams in Campbell, CA.

o   However, make sure to set cash aside in case your estimate tax liability is not accurate and you may end up owing in taxes.

-          Consider a PIN that The IRS offer to prevent fraudulent returns to be made with your social security number.

o   Taxpayers will get a new six-digit pin every year and you must use it in order to avoid a rejected E-File return or a significant delay in paper-filed returns.

o   Currently, only taxpayers who have been a victim of identity theft can get the PINs but states such as Florida, Georgia or Washington D.C are running pilot programs that allow you to apply for one.

o   If you have placed a credit freeze with Equifax, The IRS requires you to temporarily remove the freeze in order to verify your identity in order to get the PIN.

o   Downside: The IRS pin system is not foolproof as it had been a subject of cyberattacks.

The IRS also warns that taxpayers receiving certain tax documents or IRS notices such as CP 2000 to verity unreported income or a 1099 from an employer you have not worked for can be a red flag for employment-related identity theft. 

Joe DeVitis | 10/11/2017

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