The Equifax data breach is said to impact nearly half the US population. Sensitive information such as social security numbers, birthdates, addresses, and drivers license numbers have been compromised. Financial advisors recommend credit freezes, credit monitoring, and other avenues to watch out for identity theft due to the breach. This breach might also impact the 2018 tax filing season for tax year 2017 as the sensitive information obtained is exactly what is needed to file a fraudulent return for a fraudulent refund causing you a major headache when filing your actual return. Here are a few ways to mitigate this potential fraudulent use of sensitive tax information:
- File Early: The first to e-file (quickest mode) or paper file a return makes it an automatic reject for anyone else trying to e-file a return with your social security number. Don’t rush to file with incomplete or inaccurate information but gather and organize as many documents as you can during 2017 and look for online options to receive the rest.
- Change Withholdings: If you are one that expects a windfall tax return in February or March, if another return is filed in your name it may be up to 8 months before you will see the return. Changing withholdings to more exemptions on your paycheck means you will see the money now. It may be a good idea to talk about a tax estimate with your tax advisor to make you the proper exemptions are taken on the form W4 so you don’t end up owing come tax time or the amount is very minimal.
- Consider a PIN: Those who have been a victim of tax identity theft have been issued a PIN number to use on future tax returns. A few states (Florida, Georgia, Washington DC) offer an option to apply for a PIN before tax identity theft has occurred so if you live in those areas, it may be an option.
- Monitor fraud: Don’t throw out any tax notices, especially CP2000 ones showing unreported income from employers you never worked for.
Unfortunately, none of the above measures are fail safe against a fraudulent return being returned using your information but can potentially help mitigate the situation.