IRS Scam Leverages Hacked Tax Preparers, Client Bank Accounts

February 19, 2018
65 Comments

Identity thieves who specialize in tax refund fraud have been busy of late hacking online accounts at multiple tax preparation firms, using them to file phony refund requests. Once the Internal Revenue Service processes the return and deposits money into bank accounts of the hacked firms’ clients, the crooks contact those clients posing as a collection agency and demand that the money be “returned.”

In one version of the scam, criminals are pretending to be debt collection agency officials acting on behalf of the IRS. They’ll call taxpayers who’ve had fraudulent tax refunds deposited into their bank accounts, claim the refund was deposited in error, and threaten recipients with criminal charges if they fail to forward the money to the collection agency.

This is exactly what happened to a number of customers at a half dozen banks in Oklahoma earlier this month. Elaine Dodd, executive vice president of the fraud division at the Oklahoma Bankers Association, said many financial institutions in the Oklahoma City area had “a good number of customers” who had large sums deposited into their bank accounts at the same time.

Dodd said the bank customers received hefty deposits into their accounts from the U.S. Treasury, and shortly thereafter were contacted by phone by someone claiming to be a collections agent for a firm calling itself DebtCredit and using the Web site name debtcredit[dot]us.

“We’re having customers getting refunds they have not applied for,” Dodd said, noting that the transfers were traced back to a local tax preparer who’d apparently gotten phished or hacked. Those banks are now working with affected customers to close the accounts and open new ones, Dodd said. “If the crooks have breached a tax preparer and can send money to the client, they can sure enough pull money out of those accounts, too.”

Several of the Oklahoma bank’s clients received customized notices from a phony company claiming to be a collections agency hired by the IRS.

The domain debtcredit[dot]us hasn’t been active for some time, but an exact copy of the site to which the bank’s clients were referred by the phony collection agency can be found at jcdebt[dot]com — a domain that was registered less than a month ago. The site purports to be associated with a company in New Jersey called Debt & Credit Consulting Services, but according to a record (PDF) retrieved from the New Jersey Secretary of State’s office, that company’s business license was revoked in 2010.

“You may be puzzled by an erroneous payment from the Internal Revenue Service but in fact it is quite an ordinary situation,” reads the HTML page shared with people who received the fraudulent IRS refunds. It includes a video explaining the matter, and references a case number, the amount and date of the transaction, and provides a list of personal “data reported by the IRS,” including the recipient’s name, Social Security Number (SSN), address, bank name, bank routing number and account number.

All of these details no doubt are included to make the scheme look official; most recipients will never suspect that they received the bank transfer because their accounting firm got hacked.

The scammers even supposedly assign the recipients an individual “appointed debt collector,” complete with a picture of the employee, her name, telephone number and email address. However, the emails to the domain used in the email address from the screenshot above (debtcredit[dot]com) bounced, and no one answers at the provided telephone number.

Along with the Web page listing the recipient’s personal and bank account information, each recipient is given a “transaction error correction letter” with IRS letterhead (see image below) that includes many of the same personal and financial details on the HTML page. It also gives the recipient instructions on the account number, ACH routing and wire number to which the wayward funds are to be wired.

A phony letter from the IRS instructing recipients on how and where to wire the money that was deposited into their bank account as a result of a fraudulent tax refund request filed in their name.

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New EU Privacy Law May Weaken Security

February 15, 2018
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Companies around the globe are scrambling to comply with new European privacy regulations that take effect a little more than three months from now. But many security experts are worried that the changes being ushered in by the rush to adhere to the law may make it more difficult to track down cybercriminals and less likely that organizations will be willing to share data about new online threats.

On May 25, 2018, the General Data Protection Regulation (GDPR) takes effect. The law, enacted by the European Parliament, requires technology companies to get affirmative consent for any information they collect on people within the European Union. Organizations that violate the GDPR could face fines of up to four percent of global annual revenues.

In response, the Internet Corporation for Assigned Names and Numbers (ICANN) — the nonprofit entity that manages the global domain name system — is poised to propose changes to the rules governing how much personal information Web site name registrars can collect and who should have access to the data.

Specifically, ICANN has been seeking feedback on a range of proposals to redact information provided in WHOIS, the system for querying databases that store the registered users of domain names and blocks of Internet address ranges (IP addresses).

Under current ICANN rules, domain name registrars should collect and display a variety of data points when someone performs a WHOIS lookup on a given domain, such as the registrant’s name, address, email address and phone number. (Most registrars offer a privacy protection service that shields this information from public WHOIS lookups; some registrars charge a nominal fee for this service, while others offer it for free).

In a bid to help domain registrars comply with the GDPR regulations, ICANN has floated several proposals, all of which would redact some of the registrant data from WHOIS records. Its mildest proposal would remove the registrant’s name, email, and phone number, while allowing self-certified 3rd parties to request access to said data at the approval of a higher authority — such as the registrar used to register the domain name.

The most restrictive proposal would remove all registrant data from public WHOIS records, and would require legal due process (such as a subpoena or court order) to reveal any information supplied by the domain registrant.

ICANN’s various proposed models for redacting information in WHOIS domain name records.

The full text of ICANN’s latest proposed models (from which the screenshot above was taken) can be found here (PDF). A diverse ICANN working group made up of privacy activists, technologists, lawyers, trademark holders and security experts has been arguing about these details since 2016. For the curious and/or intrepid, the entire archive of those debates up to the current day is available at this link.

WHAT IS THE WHOIS DEBATE?

To drastically simplify the discussions into two sides, those in the privacy camp say WHOIS records are being routinely plundered and abused by all manner of ne’er-do-wells, including spammers, scammers, phishers and stalkers. In short, their view seems to be that the availability of registrant data in the WHOIS records causes more problems than it is designed to solve.

Meanwhile, security experts are arguing that the data in WHOIS records has been indispensable in tracking down and bringing to justice those who seek to perpetrate said scams, spams, phishes and….er….stalks. Continue reading →

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Microsoft Patch Tuesday, February 2018 Edition

February 13, 2018
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Microsoft today released a bevy of security updates to tackle more than 50 serious weaknesses in Windows, Internet Explorer/Edge, Microsoft Office and Adobe Flash Player, among other products. A good number of the patches issued today ship with Microsoft’s “critical” rating, meaning the problems they fix could be exploited remotely by miscreants or malware to seize complete control over vulnerable systems — with little or no help from users.

February’s Patch Tuesday batch includes fixes for at least 55 security holes. Some of the scarier bugs include vulnerabilities in Microsoft Outlook, Edge and Office that could let bad guys or bad code into your Windows system just by getting you to click on a booby trapped link, document or visit a compromised/hacked Web page.

As per usual, the SANS Internet Storm Center has a handy rundown on the individual flaws, neatly indexing them by severity rating, exploitability and whether the problems have been publicly disclosed or exploited. Continue reading →

Domain Theft Strands Thousands of Web Sites

February 12, 2018
47 Comments

Newtek Business Services Corp. [NASDAQ:NEWT], a Web services conglomerate that operates more than 100,000 business Web sites and some 40,000 managed technology accounts, had several of its core domain names stolen over the weekend. The theft shut off email and stranded Web sites for many of Newtek’s customers.

An email blast Newtek sent to customers late Saturday evening made no mention of a breach or incident, saying only that the company was changing domains due to “increased” security. A copy of that message can be read here (PDF).

In reality, three of their core domains were hijacked by a Vietnamese hacker, who replaced the login page many Newtek customers used to remotely manage their Web sites (webcontrolcenter[dot]com) with a live Web chat service. As a result, Newtek customers seeking answers to why their Web sites no longer resolved correctly ended up chatting with the hijacker instead.

The PHP Web chat client that the intruder installed on Webcontrolcenter[dot]com, a domain that many Newtek customers used to manage their Web sites with the company. The perpetrator can be seen in this chat using the name “admin.” Click to enlarge.

In a follow-up email sent to customers 10 hours later (PDF), Newtek acknowledged the outage was the result of a “dispute” over three domains, webcontrolcenter[dot]com, thesba[dot]com, and crystaltech[dot]com.

“We strongly request that you eliminate these domain names from all your corporate or personal browsers, and avoid clicking on them,” the company warned its customers. “At this hour, it has become apparent that as a result over the dispute for these three domain names, we do not currently have control over the domains or email coming from them.”

The warning continued: “There is an unidentified third party that is attempting to chat and may engage with clients when visiting the three domains. It is imperative that you do not communicate or provide any sensitive data at these locations.”

Newtek did not respond to requests for comment.

Domain hijacking is not a new problem, but it can be potentially devastating to the victim organization. In control of a hijacked domain, a malicious attacker could seamlessly conduct phishing attacks to steal personal information, or use the domain to foist malicious software on visitors.

Newtek is not just a large Web hosting firm: It aims to be a one-stop shop for almost any online service a small business might need. As such, it’s a mix of very different business units rolled up into one since its founding in 1998, including lending solutions, HR, payroll, managed cloud solutions, group health insurance and disaster recovery solutions.

“NEWT’s tentacles go deep into their client’s businesses through providing data security, human resources, employee benefits, payments technology, web design and hosting, a multitude of insurance solutions, and a suite of IT services,” reads a Sept. 2017 profile of the company at SeekingAlpha, a crowdsourced market analysis publication.

Newtek’s various business lines. Source: Newtek.

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U.S. Arrests 13, Charges 36 in ‘Infraud’ Cybercrime Forum Bust

February 8, 2018
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The U.S. Justice Department announced charges on Wednesday against three dozen individuals thought to be key members of ‘Infraud,” a long-running cybercrime forum that federal prosecutors say cost consumers more than a half billion dollars. In conjunction with the forum takedown, 13 alleged Infraud members from the United States and six other countries were arrested.

A screenshot of the Infraud forum, circa Oct. 2014. Like most other crime forums, it had special sections dedicated to vendors of virtually every kind of cybercriminal goods or services imaginable. Click to enlarge.

Started in October 2010, Infraud was short for “In Fraud We Trust,” and collectively the forum referred to itself as the “Ministry of Fraudulently [sic] Affairs.” As a mostly English-language fraud forum, Infraud attracted nearly 11,000 members from around the globe who sold, traded and bought everything from stolen identities and credit card accounts to ATM skimmers, botnet hosting and malicious software.

“Today’s indictment and arrests mark one of the largest cyberfraud enterprise prosecutions ever undertaken by the Department of Justice,” said John P. Cronan, acting assistant attorney general of the Justice Department’s criminal division. “As alleged in the indictment, Infraud operated like a business to facilitate cyberfraud on a global scale.”

The complaint released by the DOJ lists 36 Infraud members — some only by their hacker nicknames, others by their alleged real names and handles, and still others just as “John Does.” Having been a fairly regular lurker on Infraud over the past seven years who has sought to independently identify many of these individuals, I can say that some of these names and nick associations sound accurate but several do not.

The government says the founder and top member of Infraud was Svyatoslav Bondarenko, a hacker from Ukraine who used the nicknames “Rector” and “Helkern.” The first nickname is well supported by copies of the forum obtained by this author several years back; indeed, Rector’s profile listed him an administrator, and Rector can be seen on countless Infraud discussion threads vouching for sellers who had paid the monthly fee to advertise their services in “sticky” threads on the forum.

However, I’m not sure the Helkern association with Bondarenko is accurate. In December 2014, just days after breaking the story about the theft of some 40 million credit and debit cards from retail giant Target, KrebsOnSecurity posted a lengthy investigation into the identity of “Rescator” — the hacker whose cybercrime shop was identified as the primary vendor of cards stolen from Target.

That story showed that Rescator changed his nickname from Helkern after Helkern’s previous cybercrime forum (Darklife) got massively hacked, and it presented clues indicating that Rescator/Helkern was a different Ukrainian man named Andrey Hodirevski. For more on that connection, see Who’s Selling Cards from Target.

Also, Rescator was a separate vendor on Infraud, and there are no indications that I could find suggesting that Rector and Rescator were the same people. Here is Rescator’s most recent sales thread for his credit card shop on Infraud — dated almost a year after the Target breach. Notice the last comment on that thread alleges that Rescator had recently been arrested and that his shop was being run by law enforcement officials: 

Another top administrator of Infraud used the nickname “Stells.” According to the Justice Department, Stells’ real name is Sergey Medvedev. The government doesn’t describe his exact role, but it appears to have been administering the forum’s escrow service (see screenshot below).

Most large cybercrime forums have an escrow service, which holds the buyer’s virtual currency until forum administrators can confirm the seller has consummated the transaction acceptably to both parties. The escrow feature is designed to cut down on members ripping one another off — but it also can add considerably to the final price of the item(s) for sale.

In April 2016, Medvedev would take over as the “admin and owner” of Infraud, after he posted a note online saying that Bondarenko had gone missing, the Justice Department said.

One defendant in the case, a well-known vendor of stolen credit and debit cards who goes by the nickname “Zo0mer,” is listed as a John Doe. But according to a New York Times story from 2006, Zo0mer’s real name is Sergey Kozerev, and he hails from St. Petersburg, Russia. Continue reading →

Would You Have Spotted This Skimmer?

February 6, 2018
114 Comments

When you realize how easy it is for thieves to compromise an ATM or credit card terminal with skimming devices, it’s difficult not to inspect or even pull on these machines when you’re forced to use them personally — half expecting something will come detached. For those unfamiliar with the stealth of these skimming devices and the thieves who install them, read on.

Police in Lower Pottsgrove, PA are searching for a pair of men who’ve spent the last few months installing card and PIN skimmers at checkout lanes inside of Aldi supermarkets in the region. These are “overlay” skimmers, in that they’re designed to be installed in the blink of an eye just by placing them over top of the customer-facing card terminal.

The top of the overlay skimmer models removed from several Aldi grocery story locations in Pennsylvania over the past few months.

The underside of the skimmer hides the brains of this little beauty, which is configured to capture the personal identification number (PIN) of shoppers who pay for their purchases with a debit card. This likely describes a great number of loyal customers at Aldi; the discount grocery chain only in 2016 started accepting credit cards, and previously only took cash, debit cards, SNAP, and EBT cards.

The underside of this skimmer found at Aldi is designed to record PINs.

The Lower Pottsgrove police have been asking local citizens for help in identifying the men spotted on surveillance cameras installing the skimming devices, noting that multiple victims have seen their checking accounts cleaned out after paying at compromised checkout lanes.

Local police released the following video footage showing one of the suspects installing an overlay skimmer exactly like the one pictured above. The man is clearly nervous and fidgety with his feet, but the cashier can’t see his little dance and certainly doesn’t notice the half second or so that it takes him to slip the skimming device over top of the payment terminal.

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Alleged Spam Kingpin ‘Severa’ Extradited to US

February 5, 2018
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Peter Yuryevich Levashov, a 37-year-old Russian computer programmer thought to be one of the world’s most notorious spam kingpins, has been extradited to the United States to face federal hacking and spamming charges.

Levashov, in an undated photo.

Levashov, who allegedly went by the hacker names “Peter Severa,” and “Peter of the North,” hails from St. Petersburg in northern Russia, but he was arrested last year while in Barcelona, Spain with his family.

Authorities have long suspected he is the cybercriminal behind the once powerful spam botnet known as Waledac (a.k.a. “Kelihos”), a now-defunct malware strain responsible for sending more than 1.5 billion spam, phishing and malware attacks each day.

According to a statement released by the U.S. Justice Department, Levashov was arraigned last Friday in a federal court in New Haven, Ct. Levashov’s New York attorney Igor Litvak said he is eager to review the evidence against Mr. Levashov, and that while the indictment against his client is available, the complaint in the case remains sealed.

“We haven’t received any discovery, we have no idea what the government is relying on to bring these allegations,” Litvak said. “Mr. Levashov maintains his innocence and is looking forward to resolving this case, clearing his name, and returning home to his wife and 5-year-old son in Spain.”

In 2010, Microsoft — in tandem with a number of security researchers — launched a combined technical and legal sneak attack on the Waledac botnet, successfully dismantling it. The company would later do the same to the Kelihos botnet, a global spam machine which shared a great deal of computer code with Waledac.

Severa routinely rented out segments of his Waledac botnet to anyone seeking a vehicle for sending spam. For $200, vetted users could hire his botnet to blast one million pieces of spam. Junk email campaigns touting employment or “money mule” scams cost $300 per million, and phishing emails could be blasted out through Severa’s botnet for the bargain price of $500 per million.

Waledac first surfaced in April 2008, but many experts believe the spam-spewing machine was merely an update to the Storm worm, the engine behind another massive spam botnet that first surfaced in 2007. Both Waledac and Storm were major distributors of pharmaceutical and malware spam.

According to Microsoft, in one month alone approximately 651 million spam emails attributable to Waledac/Kelihos were directed to Hotmail accounts, including offers and scams related to online pharmacies, imitation goods, jobs, penny stocks, and more. The Storm worm botnet also sent billions of messages daily and infected an estimated one million computers worldwide.

Both Waledac/Kelihos and Storm were hugely innovative because they each included self-defense mechanisms designed specifically to stymie security researchers who might try to dismantle the crime machines.

Waledac and Storm sent updates and other instructions via a peer-to-peer communications system not unlike popular music and file-sharing services. Thus, even if security researchers or law-enforcement officials manage to seize the botnet’s back-end control servers and clean up huge numbers of infected PCs, the botnets could respawn themselves by relaying software updates from one infected PC to another.

FAKE NEWS

According to a lengthy April 2017 story in Wired.com about Levashov’s arrest and the takedown of Waledac, Levashov got caught because he violated a basic security no-no: He used the same log-in credentials to both run his criminal enterprise and log into sites like iTunes.

After Levashov’s arrest, numerous media outlets quoted his wife saying he was being rounded up as part of a dragnet targeting Russian hackers thought to be involved in alleged interference in the 2016 U.S. election. Russian news media outlets made much hay over this claim. In contesting his extradition to the United States, Levashov even reportedly told the RIA Russian news agency that he worked for Russian President Vladimir Putin‘s United Russia party, and that he would die within a year of being extradited to the United States.

“If I go to the U.S., I will die in a year,” Levashov is quoted as saying. “They want to get information of a military nature and about the United Russia party. I will be tortured, within a year I will be killed, or I will kill myself.”

But there is so far zero evidence that anyone has accused Levashov of being involved in election meddling. However, the Waledac/Kelihos botnet does have a historic association with election meddling: It was used during the Russian election in 2012 to send political messages to email accounts on computers with Russian Internet addresses. Those emails linked to fake news stories saying that Mikhail D. Prokhorov, a businessman who was running for president against Putin, had come out as gay. Continue reading →

Attackers Exploiting Unpatched Flaw in Flash

February 2, 2018
29 Comments

Adobe warned on Thursday that attackers are exploiting a previously unknown security hole in its Flash Player software to break into Microsoft Windows computers. Adobe said it plans to issue a fix for the flaw in the next few days, but now might be a good time to check your exposure to this still-ubiquitous program and harden your defenses.

Adobe said a critical vulnerability (CVE-2018-4878) exists in Adobe Flash Player 28.0.0.137 and earlier versions. Successful exploitation could allow an attacker to take control of the affected system.

The software company warns that an exploit for the flaw is being used in the wild, and that so far the attacks leverage Microsoft Office documents with embedded malicious Flash content. Adobe said it plans to address this vulnerability in a release planned for the week of February 5.

According to Adobe’s advisory, beginning with Flash Player 27, administrators have the ability to change Flash Player’s behavior when running on Internet Explorer on Windows 7 and below by prompting the user before playing Flash content. A guide on how to do that is here (PDF). Administrators may also consider implementing Protected View for Office. Protected View opens a file marked as potentially unsafe in Read-only mode.

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Drugs Tripped Up Suspects In First Known ATM “Jackpotting” Attacks in the US

January 30, 2018
42 Comments

On Jan. 27, 2018, KrebsOnSecurity published what this author thought was a scoop about the first known incidence of U.S. ATMs being hit with “jackpotting” attacks, a crime in which thieves deploy malware that forces cash machines to spit out money like a loose Las Vegas slot machine. As it happens, the first known jackpotting attacks in the United States were reported in November 2017 by local media on the west coast, although the reporters in those cases seem to have completely buried the lede.

Isaac Rafael Jorge Romero, Jose Alejandro Osorio Echegaray, and Elio Moren Gozalez have been charged with carrying out ATM “jackpotting” attacks that force ATMs to spit out cash like a Las Vegas casino.

On Nov. 20, 2017, Oil City News — a community publication in Wyoming — reported on the arrest of three Venezuelan nationals who were busted on charges of marijuana possession after being stopped by police.

After pulling over the van the men were driving, police on the scene reportedly detected the unmistakable aroma of pot smoke wafting from the vehicle. When the cops searched the van, they discovered small amounts of pot, THC edible gummy candies, and several backpacks full of cash.

FBI agents had already been looking for the men, who were allegedly caught on surveillance footage tinkering with cash machines in Wyoming, Colorado and Utah, shortly before those ATMs were relieved of tens of thousands of dollars.

According to a complaint filed in the U.S. District Court for the District of Colorado, the men first hit an ATM at a credit union in Parker, Colo. on October 10, 2017. The robbery occurred after business hours, but the cash machine in question was located in a vestibule available to customers 24/7.

The complaint says surveillance videos showed the men opening the top of the ATM, which housed the computer and hard drive for the ATM — but not the secured vault where the cash was stored. The video showed the subjects reaching into the ATM, and then closing it and exiting the vestibule. On the video, one of the subjects appears to be carrying an object consistent with the size and appearance of the hard drive from the ATM.

Approximately ten minutes later, the subjects returned and opened up the cash machine again. Then they closed the top of the ATM and appeared to wait while the ATM computer restarted. After that, both subjects could be seen on the video using their mobile phones. One of the subjects reportedly appeared to be holding a small wireless mini-computer keyboard.

Soon after, the ATM began spitting out cash, netting the thieves more than $24,000. When they they were done, the suspects allegedly retrieved their equipment from the ATM and left.

Forensic analysis of the ATM hard drive determined that the thieves installed the Ploutus.D malware on the cash machine’s hard drive. Ploutus.D is an advanced malware strain that lets crooks interact directly with the ATM’s computer and force it to dispense money.

“Often the malware requires entering of codes to dispense cash,” reads an FBI affidavit (PDF). “These codes can be obtained by a third party, not at the location, who then provides the codes to the subjects at the ATM. This allows the third party to know how much cash is dispensed from the ATM, preventing those who are physically at the ATM from keeping cash for themselves instead of providing it to the criminal organization. The use of mobile phones is often used to obtain these dispensing codes.” Continue reading →

File Your Taxes Before Scammers Do It For You

January 29, 2018
51 Comments

Today, Jan. 29, is officially the first day of the 2018 tax-filing season, also known as the day fraudsters start requesting phony tax refunds in the names of identity theft victims. Want to minimize the chances of getting hit by tax refund fraud this year? File your taxes before the bad guys can!

Tax refund fraud affects hundreds of thousands, if not millions, of U.S. citizens annually. Victims usually first learn of the crime after having their returns rejected because scammers beat them to it. Even those who are not required to file a return can be victims of refund fraud, as can those who are not actually due a refund from the IRS.

According to the IRS, consumer complaints over tax refund fraud have been declining steadily over the years as the IRS and states enact more stringent measures for screening potentially fraudulent applications.

If you file your taxes electronically and the return is rejected, and if you were the victim of identity theft (e.g., if your Social Security number and other information was leaked in the Equifax breach last year), you should submit an Identity Theft Affidavit (Form 14039). The IRS advises that if you suspect you are a victim of identity theft, continue to pay your taxes and file your tax return, even if you must do so by paper.

If the IRS believes you were likely the victim of tax refund fraud in the previous tax year they will likely send you a special filing PIN that needs to be entered along with this year’s return before the filing will be accepted by the IRS electronically. This year marks the third out of the last five that I’ve received one of these PINs from the IRS.

Of course, filing your taxes early to beat the fraudsters requires one to have all of the tax forms needed to do so. As a sole proprietor, this is a great challenge because many companies take their sweet time sending out 1099 forms and such (even though they’re required to do so by Jan. 31).

A great many companies are now turning to online services to deliver tax forms to contractors, employees and others. For example, I have received several notices via email regarding the availability of 1099 forms online; most say they are sending the forms in snail mail, but that if I need them sooner I can get them online if I just create an account or enter some personal information at some third-party site.

Having seen how so many of these sites handle personal information, I’m not terribly interested in volunteering more of it. According to Bankrate, taxpayers can still file their returns even if they don’t yet have all of their 1099s — as long as you have the correct information about how much you earned.

“Unlike a W-2, you generally don’t have to attach 1099s to your tax return,” Bankrate explains. “They are just issued so you’ll know how much to report, with copies going to the IRS so return processors can double-check your entries. As long as you have the correct information, you can put it on your tax form without having the statement in hand.” Continue reading →