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Understanding the Rising Threat of Tax Fraud This Season
As we approach the tax filing deadline, the urgency for vigilance against tax fraud has never been greater. A recent analysis from TransUnion reveals a disturbing trend: the risk of tax-related scams is not only high but elevated this year, thanks to rampant data breaches.
A Closer Look at the Data Breaches
In 2024, researchers at TransUnion reported a staggering 970 data breaches, exposing an alarming 640 million consumer records containing sensitive information like Social Security numbers and address histories. This is an increase from previous years, with full Social Security numbers being uncovered in a whopping 71% of breaches from the first half of the year, up from 57% in all of 2023.
“The volume and severity of recent data breaches have created tremendous vulnerability,” stated Greg Schlichter, director of research and consulting at TransUnion. Such vulnerabilities enable fraudsters to easily impersonate victims, which has become a growing concern for government agencies and financial institutions during this tax season.
The Mechanisms Behind the Fraud
Fraudsters have become increasingly sophisticated, often targeting call centers to validate their stolen information or impersonate individuals. This includes spoofing calls or using Voice-over-IP services to trick unsuspecting agents. Experts recommend that call center leaders remain vigilant and skeptical—routine calls should not be exempt from scrutiny.
Moreover, accessing online government portals with stolen identities has become common. This allows impersonators to file false tax returns or modify return statuses, causing significant inconvenience to genuine taxpayers.
What Government Agencies Can Do
To combat this wave of tax fraud, TransUnion advises government agencies to adopt advanced identity verification and document authentication technologies. “Agencies should employ tools that can flag impersonators, particularly those utilizing photo-realistic credentials generated by AI,” Naureen Ali, TransUnion U.S. head of fraud, emphasized.
There’s also an imperative for improved communication—agencies should utilize branded calling technologies to reach out to taxpayers about potential fraud, as many consumers are reluctant to answer calls from unknown numbers.
The Role of Financial Institutions
Financial institutions play a crucial role by ensuring that any payee matches the account holder on record. This can help intercept fraudulent tax refunds. In addition to proactive measures, banks need to scrutinize new account openings more robustly to detect changes that may signal fraudulent activities.
Despite these overarching strategies, individual consumers must remain proactive as well. Monitoring bank account activity and credit history can provide early warnings of unauthorized account creations or unwarranted transactions stemming from tax fraud.
Empowering Consumers to Protect Themselves
While it’s crucial for businesses and agencies to tighten their defenses, consumers should also take steps to safeguard their sensitive information. Regularly checking bank accounts around the tax refund season can ensure that any suspicious activity is caught early. Additionally, utilizing credit monitoring services can help preemptively highlight new accounts opened in one’s name.
As the deadline draws closer, staying informed and vigilant against tax fraud is essential for consumers and institutions alike. Preventive measures can make all the difference this tax season, allowing taxpayers to navigate the filing process securely.
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