When you think of “tax fraud,” you probably think of people who find ways to avoid filing their taxes honestly. However, with advances in artificial intelligence, new types of tax fraud are becoming more prevalent.
This involves a hacker using a form of identity hijacking to file a tax return in someone else’s name so that a refund is sent to them.
It has become clear that tax evasion is on the rise on the dark web. Here are some things to keep in mind to avoid becoming a victim.
Post-it note attached to tax form (Kurt “Cyber Guy” Knutson)
What is AI-powered fraud and identity hijacking?
AI-powered fraud is when hackers leverage the power of AI to commit sophisticated fraud. His one type of AI-powered fraud is known as identity hijacking. This is when a hacker not only steals someone’s identity, but also impersonates that person in all kinds of ways. One example is deepfakes, which can have dire consequences beyond the person being impersonated.
What is artificial intelligence (AI)?
Another is AI tax fraud. This is used by hackers to use AI to obtain sensitive information and ultimately send tax returns.
But how exactly do we do this?
laser scanner on a person’s face (Kurt “Cyber Guy” Knutson)
Read more: Don’t fall for sneaky tax scams that steal your identity and money
How fraudsters are using AI to commit tax fraud
This new type of tax fraud is reported by LexisNexis Risk Solutions’ government group, CEO of cybersecurity and data analytics company Haywood Talcove;
AI accelerates fraud
Traditionally, tax fraud has involved the use of stolen Personally Identifiable Information (PII), which refers to data that can be used to identify an individual. This includes both confidential and non-confidential information.
Sensitive PII: name, social security number, driver’s license, mailing address, credit card details, passport information, financial records, medical history. Companies often use anonymization techniques to protect sensitive PII when sharing data.
Non-sensitive PII: This includes zip code, race, gender, date of birth, and even information available on social media sites. Non-sensitive PII is less important, but can still contribute to the identification of an individual.
Thanks to AI, criminals can more effectively exploit stolen personally identifiable information (PII) for fraudulent activities.
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The Process: From PII Theft to Fake IDs
Hackers can obtain PII through a variety of means, including: Phishing scam Or malware. This information is used to create a scam ID that includes a photo of the scammer with the victim’s details.
Exploiting facial recognition to access the IRS
Once they have a fake ID, scammers can bypass the IRS’s facial recognition security measures, file tax returns in the victim’s name, and redirect refunds to their own accounts.
IRS documents (Luke Charette/Bloomberg via Getty Images)
Voices calling for stronger verification measures
Experts are urging government agencies to implement more robust verification processes, such as cross-referencing ID and DMV records, to combat this sophisticated form of tax evasion.
Read more: Why you shouldn’t carry these things in your wallet
How to tell if someone filed a tax return in your name
Once the IRS identifies a problem with your tax return, it will send you a letter before issuing your refund. This notification flags your initial return as fraudulent and allows you to proceed with your return as normal.
The IRS has a system in place to detect suspicious returns. However, if that algorithm is unable to identify anomalies and process fraudulent returns, it won’t be discovered until you try to file a return yourself and it gets rejected.
In most cases, the second option is more common. Taxpayers typically receive an e-file rejection notice indicating the problem. Unfortunately, these notices lack specific details. Instead, it just highlights issues related to social security numbers. If you did not replace the numbers by mistake, the denial may be due to taxpayer identity theft.
What happens after a scammer files a fake tax return in your name?
The main consequence of fake tax returns is that your tax refund is stolen. Scammers essentially pretend to be you and divert your legitimate profits to their own bank accounts. But that’s not the only problem. If she attempts to file a valid return, the IRS system may reject her return due to a duplicate return. This throws you into a bureaucratic maze to resolve issues and prove your identity.
Adding to the frustration, taxpayer identity theft is a growing crime, and the IRS’ processes for resolving these situations are still evolving. This can mean longer delays and uncertainty in resolving issues.
Fraud on tax documents (Kurt “Cyber Guy” Knutson)
Read more: How scammers are trying to exploit your grief and wallet with new funeral scams
6 ways to protect yourself from AI tax fraud
Again, this is a relatively new scam, so cybersecurity experts are still learning a lot about what it is and therefore how to mitigate it. But now that you know it’s out there, here are six things you can do to keep yourself safe.
1. File your taxes as soon as possible. If you defeat them, they will not be able to commit fraud.
2. Never share personal information. Specifically, social security numbers and other PII information are displayed on messaging apps and during calls with strangers. Many phishing attacks cause people to divulge this information before they understand what has happened.
3. Use strong passwords and reset them often. Create strong passwords for your accounts and devices, and avoid using the same passwords for multiple online accounts. Please consider using . password manager Securely store and generate complex passwords. It helps you create unique, hard-to-crack passwords that hackers can never guess.
4. Use an identity theft protection service. Using an identity theft protection service is an important step in protecting yourself from tax fraud. Identity theft companies monitor your personal information, such as your social security number, phone number, and email address, and alert you if it is sold on the dark web or used to open an account. It can also help freeze bank and credit card accounts to prevent further misuse by criminals. Check out our tips and recommendations on how to protect yourself from identity theft.
5. Don’t click on links or files When you don’t know what it is, even if it’s from a trusted friend. That friend may have been hacked and now someone is targeting you. The best way to protect yourself from clicking on malicious links that install malware that can access your personal information is to install antivirus protection on all your devices. This can also alert you to phishing emails and ransomware scams. Get my picks for the best antivirus protection products of 2024 for Windows, Mac, Android, and iOS devices.
6. Do your best to ensure that sensitive data is not easily found online. No service promises to remove all data from the Internet, but if you want to constantly monitor and automate the process of removing information from hundreds of sites over an extended period of time, a removal service is a good option. is the best. Check out my recommended removal services here.
If you believe you are a victim of tax fraud, you can check the following information on the official IRS website: Step-by-step guidance About how to deal with the situation.
Cart important points
It’s no doubt scary to think of all the different ways hackers and scammers can take advantage of you. And as AI makes our jobs easier, it’s hard to keep up. What will they think next? That’s why at CyberGuy, we do our best to stay up to date with the latest hacking news to help you stay one step ahead of criminals.
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In light of the growing threat of AI-powered fraud, what additional security measures do you think governments should take to protect personal information? Email us. Cyberguy.com/Contact
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