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MARKETREALIST.COM / ECONOMY & WORK

Scammers Exploit AI Technology to Forge Flawless Tax Returns

Scammers have been leveraging AI to perpetrate sophisticated identity-hijacking schemes.
PUBLISHED MAR 18, 2024
Cover Image Source: A woman views historical documents and photographs displayed in a high-tech art | Getty Images | Photo by Chris McGrath
Cover Image Source: A woman views historical documents and photographs displayed in a high-tech art | Getty Images | Photo by Chris McGrath

Tax season has long been synonymous with headaches and paperwork, but today, it's not just the IRS you need to worry about. The rise of artificial intelligence (AI) has ushered in a new era of tax fraud, where scammers leverage advanced technology to perpetrate sophisticated identity-hijacking schemes.

Image source: Pexels | Photo by Nataliya Vaitkevich
Image source: Pexels | Photo by Nataliya Vaitkevich

"Tax crimes surge during filing season because criminals steal unknowing taxpayers' information, hack into the servers of CPA firms and tax preparation services, and victimize unsuspecting taxpayers with the false promise of huge tax refunds," CI Chief Jim Lee said in a news release.

Traditionally, tax fraud involved individuals finding ways to evade taxes or falsify information on their returns. However, with the advent of AI, a new type of tax fraud has emerged; one that capitalizes on the vulnerabilities of modern technology to orchestrate seamless scams.

Identity hijacking lies at the heart of this new wave of fraud. Hackers exploit stolen Personally Identifiable Information (PII) to create convincing fake identities, complete with forged documents and even deepfake videos. With these identities in hand, scammers can bypass security measures and file tax returns in the names of their victims, diverting refunds into their own accounts with ease.

Cutting edge applications of Artificial Intelligence | Getty Images | Photo by  Andrea Verdelli
Image Source: Artificial Intelligence | Getty Images | Photo by Andrea Vercelli

The acceleration of fraud through AI has raised alarm bells among cybersecurity experts. Haywood Talcove, CEO of LexisNexis Risk Solutions' Government group, warns that criminals can now exploit stolen PII more efficiently than ever before, thanks to the capabilities of AI.

The process of AI-powered tax fraud begins with the acquisition of PII through various means, including phishing scams and malware. Once obtained, this information is used to create fake IDs, meticulously crafted to pass authentication checks. By exploiting facial recognition technology, fraudsters can gain access to IRS systems, filing fraudulent tax returns undetected, and rerouting refunds to their accounts.

To combat this evolving threat, experts are calling for enhanced verification measures, such as cross-referencing IDs with Department of Motor Vehicles (DMV) records. However, as fraudsters continue to adapt their tactics, staying one step ahead remains a daunting challenge.

Pexels | Nataliya Vaitkevich
Image Source: Pexels | Photo by Nataliya Vaitkevich

So, how can taxpayers avoid falling victim to AI-powered tax fraud? Here are six essential steps to safeguard your financial information and minimize the risk of identity theft:

1. File Early: Beat fraudsters at their own game by filing taxes as early as possible, reducing the window of opportunity for scammers to strike.

2. Guard Your Personal Information: Never share sensitive information, such as your Social Security number with unknown individuals or over unauthorized channels.

3. Strengthen Password Security: Use strong, unique passwords for your accounts, and consider employing a password manager to enhance security.

4. Invest in Identity Theft Protection: Consider enlisting the help of an identity theft protection service to monitor your personal information and alert you to any suspicious activity.

5. Exercise Caution Online: Avoid clicking on unfamiliar links or files, as they may contain malware designed to compromise your data.

6. Manage Your Online Presence: Take steps to minimize the availability of your personal information online, reducing the likelihood of it falling into the wrong hands.

If you suspect you've been a victim of tax fraud, contact the IRS immediately. By remaining vigilant and proactive in safeguarding your financial information, you can mitigate the risk of falling prey to such scams.

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