Widespread fraud requires widespread protections: how can you protect yourself?

March 11, 2021

Related PeopleAnne M. Wolniakowski

Practice AreasCorporate

As though the turmoil of the introduction of the COVID-19 pandemic in 2020 wasn’t enough to deal with, many people also became and continue to become victims of identity theft and fraud. Many state and federal agencies have attempted to address and provide guidance on what to do if one becomes a victim of identity theft and fraud. The IRS experienced fraudulent claims to taxpayers’ refunds as well as with COVID-19 Economic Impact Payments, commonly referred to as stimulus checks. Locally, as seen in other states, Illinois residents have experienced a high volume of fraudulent claims and identity theft related to claims made to the Illinois Department of Employment Security (IDES). 
How to protect yourself

Effective Jan. 11, 2021, the IRS expanded the Identity Protection PIN Program to taxpayers who verify their identity. The Identity Protection PIN (PIN) is a six-digit-code that offers additional protections for a taxpayer’s social security number on his/her tax return. The PIN prevents someone else from filing a tax return using a taxpayer’s social security number. This PIN is only known to the IRS and to the lawful taxpayer. The PIN is valid for one calendar year and taxpayers will need to get a new PIN each filing season. This is a voluntary program and helps prevent identity thieves from filing fraudulent tax returns by using the more and personally identifiable information of a taxpayer. As one can imagine, taxpayers should never share their PIN with anyone other than their tax accountant or trusted tax preparer. The IRS assures taxpayers that it will never call, text or email requesting their PIN. 
Taxpayers must undergo an identity verification process in order to obtain a PIN. Taxpayers seeking a PIN should log on to the IRS’ website. There is a link to “Get a PIN,” a tool that uses secure access authentication to confirm taxpayers’ identities. The IRS will immediately reveal taxpayers’ PINs once they have authenticated their identities.
If people are confirmed victims of identity theft and the IRS has resolved their tax account issues, the IRS is supposed to mail affected taxpayers a CP01A Notice with their PINs each year. However, as noted above, starting in 2021, taxpayers may voluntarily opt into the PIN program as a proactive way to protect themselves from tax-related identity theft.
Unemployment insurance fraud

In addition to the IRS and tax-related-fraud schemes to which some federal taxpayers find themselves fallen prey, residents of Illinois also may find themselves subject to unemployment insurance identity theft fraud. 
Some signs that a person may have been a victim to this type of fraud include, without limitation:
  • Receiving a debit card or an unemployment insurance letter without ever having filed a claim for benefits; 
  • Being notified by an employer that a claim for benefits has been filed when you are still employed; 
  • Seeing an existing claim when you attempt to file a claim online; 
  • Receiving IRS letters regarding a failure to report unemployment insurance benefits;
  • Being notified that there is a state or federal tax offset; or 
  • A deceased relative receives an unemployment benefit card. 
The above is not an exhaustive list, but certainly contain some “tip offs” that your identity or personal information has been compromised in an attempt to obtain these benefits fraudulently.
If fraud is suspected, the IDES website contains guidance on the steps to take. They include reporting the fraudulent claim to the IDES directly on its website as soon as you receive an indication of the fraud. In addition, the victim should not activate the debit card that they may have received and they should not contact KeyBank or any of the institutions that issue these cards. The victim should request free credit reports to review for fraudulent activities and/or may want to engage other identity theft protection services. The IDES will investigate the claim and will send a letter confirming the claim has been stopped if it finds that it is in fact fraudulent. The IDES website has stated that a person will not owe any money as a result of a fraudulent claim and not be liable to repay benefits as might be stated in an overpayment letter that is automatically generated. 
Minimizing exposure to fraud
Changing passwords often, using multiple authentications (if available), monitoring accounts, opting out of unsolicited credit card offers, and reacting rapidly to any suspicious activity are all ways that may help to mitigate one’s exposure to fraud. While the IRS and IDES have taken steps to deal with the uptick of fraud claims and activities, the best protection is for taxpayers and residents to be their own advocates and continually stay informed on ways to proactively protect their financial health.
If you have questions, feel free to consult with a Chuhak & Tecson Corporate Transactions & Business Law attorney.
Client alert authored by: Anne M. Wolniakowski (312 855 4338), Principal.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.