Why The TurboTax Security Breach Should Worry Us

The security breach of TurboTax came as a blow to Intuit, the company that owns TurboTax. Even though TurboTax was operational again, after a brief shutdown and added security, the breach shows the damage identity thieves are capable of inflicting. It is particularly worrisome because taxpayers had no control over preventing their identities from being stolen.

Identity Theft On The Rise

Identity theft is steadily becoming a problem with no solution. Despite the efforts of the IRS to make taxpayers aware of identity theft, fraud continues to be a rampant problem. Scammers are hacking phones, stealing documents from mailboxes, and have now infiltrated tax filing software. Fox Business discusses how the problem of identity theft is quickly growing into an epidemic:

So far, there’s little more to the Intuit/TurboTax story beyond what the company has said: that the suspension of services was a precautionary measure aimed at combatting fraudulent state tax returns (federal filings were unaffected, presumably because of national identity theft-prevention efforts). Intuit did not immediately respond to a request for comment from Credit.com.

Consumers and experts in the field want to know more about why this happened, but while we wait for the TurboTax-specific details to emerge, there’s one thing everyone can very clearly take away from this event: Tax-related identity theft is a huge problem and it’s getting worse.

It can be extremely difficult to know if your identity has been stolen. Prevention is practically impossible — for example, consumers caught up in the Anthem breach had no way of keeping their Social Security numbers out of thieves’ reach — but there are a handful of effective detection methods. Still, that generally requires someone attempting to fraudulently use your identity before you can stop them from going further.

The Lesson: File Early

With tax-related identity theft, it’s a race to see who files first: you or the thief. As far as fraud prevention is concerned, it’s in your best interest to file as soon as possible. Then again, this TurboTax incident involved people who were filing relatively early, and they still had their paperwork rejected, because someone had already used their information to file for a refund.

This all culminates in a grim outlook for consumers trying to protect their identities. There’s no sure way to prevent fraud, but you can take measures to decrease your vulnerability to identity thieves: Try to file your taxes as soon as possible, and monitor your credit for signs of unauthorized use of your identity.

Know The Signs of Identity Theft

Unfortunately, most people won’t know they’re a victim of identity theft until it’s too late. There are signs, however, that may indicate that there’s a problem.

If any of the following happens to you, it’s likely that your information has been compromised:

• You receive a letter from the IRS inquiring about a suspicious tax return you did not file.
• You can’t submit your tax return online because of a duplicate Social Security number.
• You get a tax transcript in the mail that you did not request.
• You receive an IRS notice that an online account has been created in your name but you did not set one up.
• You get an IRS notice that your existing online account has been accessed or disabled when you took no action.
• You receive an IRS notice that you owe additional tax or refund offset, or that you have had collection actions taken against you for a year you did not file a tax return.
• IRS records indicate you received wages or other income from an unknown employer.

Take These Steps to Protect Yourself

If you believe your information has been compromised, there are steps you can take to protect yourself. For tax-related identity theft, the IRS recommends the following actions:

• Call the number provided on any IRS notice or letter you have received.
• If you can’t file your return online due to a Social Security issue, complete Form 14039, Identity Theft Affidavit, attach it to your return and mail your return.
• Visit IdentityTheft.gov and follow the instructions for protecting yourself and your financial accounts.
• If you think someone has filed a fraudulent return in your name, follow the steps for requesting a copy here.

Starting in 2021, all taxpayers who can verify their identities may request an Identity Protection Pin. This six-digit PIN offers additional protection for your Social Security number on your tax return. To obtain an IP PIN, use the Get an IP PIN tool and opt into the program. For additional help, you can also contact the IRS at 800-908-4490.