Posts Tagged: irs


24
Mar 17

Phishing 101 at the School of Hard Knocks

A recent, massive spike in sophisticated and successful phishing attacks is prompting many universities to speed up timetables for deploying mandatory two-factor authentication (2FA) — requiring a one-time code in addition to a password — for access to student and faculty services online. This is the story of one university that accelerated plans to require 2FA after witnessing nearly twice as many phishing victims in the first two-and-half months of this year than it saw in all of 2015.

bgBowling Green State University in Ohio has more than 20,000 students and faculty, and like virtually any other mid-sized state school its Internet users are constantly under attack from scammers trying to phish login credentials for email and online services.

BGSU had planned later this summer to make 2FA mandatory for access to the school’s portal — the primary place where students register for classes, pay bills, and otherwise manage their financial relationship to the university.

That is, until a surge in successful phishing attacks resulted in several students having bank accounts and W-2 tax forms siphoned.

On March 1, 2017 all BGSU account holders were required to change their passwords, and on March 15, 2017 two-factor authentication (Duo) protection was placed in front of the MyBGSU portal [full disclosure: Duo is a longtime advertiser on KrebsOnSecurity].

Matt Haschak, director of IT security and infrastructure at BGSU, said the number of compromised accounts detected at BGSU has risen from 250 in calendar year 2015 to 1000 in 2016, and to approximately 400 in the first 75 days of 2017.

Left unchecked, phishers are on track to steal credentials from nearly 10 percent of the BGSU student body by the end of this year. The university has offered 2FA options for its portal access since June 2016, but until this month few students or faculty were using it, Haschak said.

“We saw very low adoption when it was voluntary,” he said. “And typically the people who adopted it were not my big security risks.”

Haschak said it’s clear that the scale and size of the phishing problem is hardly unique to BGSU.

“As I keep preaching to our campus community, this is not unique to BGSU,” Haschak said. “I’ve been talking a lot lately to my counterparts at universities in Ohio and elsewhere, and we’re all getting hit with these attacks very heavily right now. Some of the phishing scams are pretty good, but unfortunately some are god-awful, and I think people are just not thinking or they’re too busy in their day, they receive something on their phone and they just click it.”

Last month, an especially tricky phishing scam fooled several students who are also employed at the university into giving away their BGSU portal passwords, after which the thieves changed the victims’ direct deposit information so that their money went to accounts controlled by the phishers.

In other scams, the phishers would change the routing number for a bank account tied to a portal user, and then cancel that student’s classes near the beginning of a semester — thus kicking off a fraudulent refund.

One of the victims even had a fraudulent tax refund request filed in her name with the IRS as a result, Haschak said.

“They went in and looked at her W-2 information, which is also available via the portal,” he said. Continue reading →


21
Mar 17

Student Aid Tool Held Key for Tax Fraudsters

Citing concerns over criminal activity and fraud, the U.S. Internal Revenue Service (IRS) has disabled an automated tool on its Web site that was used to help students and their families apply for federal financial aid. The removal of the tool has created unexpected hurdles for many families hoping to qualify for financial aid, but the action also eliminated a key source of data that fraudsters could use to conduct tax refund fraud.

Last week, the IRS and the Department of Education said in a joint statement that they were temporarily shutting down the IRS’s Data Retrieval Tool. The service was designed to make it easier to complete the Education Department’s Free Application for Federal Student Aid (FAFSA) — a lengthy form that serves as the starting point for students seeking federal financial assistance to pay for college or career school.

The U.S. Department of Education's FAFSA federal student aid portal. A notice about the closure of the IRS's data retrieval tool can be seen in red at the bottom right of this image.

The U.S. Department of Education’s FAFSA federal student aid portal. A notice about the closure of the IRS’s data retrieval tool can be seen in red at the bottom right of this image.

In response to requests for comment, the IRS shared the following statement: “As part of a wider, ongoing effort at the IRS to protect the security of data, the IRS decided to temporarily suspend their Data Retrieval Tool (DRT) as a precautionary step following concerns that information from the tool could potentially be misused by identity thieves.”

“The scope of the issue is being explored, and the IRS and FSA are jointly investigating the issue,” the statement continued. “At this point, we believe the issue is relatively isolated, and no additional action is needed by taxpayers or people using these applications. The IRS and FSA are actively working on a way to further strengthen the security of information provided by the DRT. We will provide additional information when we have a specific timeframe for returning the DRT or other details to share.”

The removal of the IRS’s tool received relatively broad media coverage last week. For example, a story in The Wall Street Journal notes that the Treasury Inspector General for Tax Administration — which provides independent oversight of the IRS — “opened a criminal investigation into the potentially fraudulent use of the tool.”

Nevertheless, I could not find a single publication that sought to explain precisely what information identity thieves were seeking from this now-defunct online resource. Two sources familiar with the matter but who asked to remain anonymous because they were not authorized to speak on the record told KrebsOnSecurity that identity thieves were using the IRS’s tool to look up the “adjusted gross income” (AGI), which is an individual or family’s total gross income minus specific deductions.

Anyone completing a FAFSA application will need to enter the AGI as reported on the previous year’s income tax return of their parents or guardians. The AGI is listed on the IRS-1040 forms that taxpayers must file with the IRS each year. The IRS’s online tool was intended as a resource for students who needed to look up the AGI but didn’t have access to their parents’ tax returns.

Eligible FAFSA applicants could use the IRS’s data retrieval tool to populate relevant fields in the application with data pulled directly from the IRS. Countless college Web sites explain how the tool works in more detail; here’s one example (PDF).

As it happens, the AGI is also required to sign and validate electronic tax returns filed with the IRS. Consequently, the IRS’s data retrieval tool would be a terrific resource to help identity thieves successfully file fraudulent tax refund requests with the agency.

A notice from the IRS states that the adjusted gross income (AGI) is needed to validate electronically-filed tax returns.

A notice from the IRS states that the adjusted gross income (AGI) is needed to validate electronically-filed tax returns.

Continue reading →


2
Feb 17

IRS: Scam Blends CEO Fraud, W-2 Phishing

Most regular readers here are familiar with CEO fraud — e-mail scams in which the attacker spoofs the boss and tricks an employee at the organization into wiring funds to the fraudster. Loyal readers also have heard an earful about W-2 phishing, in which crooks impersonate the boss and request a copy of all employee tax forms. According to a new “urgent alert” issued by the U.S. Internal Revenue Service, scammers are now combining both schemes and targeting a far broader range of organizations than ever before.

athookThe IRS said phishers are off to a much earlier start this year than in tax years past, trying to siphon W-2 data that can be used to file fraudulent refund requests on behalf of taxpayers. The agency warned that thieves also appear to be targeting a wider range of organizations in these W-2 phishing schemes, including school districts, healthcare organizations, chain restaurants, temporary staffing agencies, tribal organizations and nonprofits.

Perhaps because they are already impersonating the boss, the W-2 phishers feel like they’re leaving money on the table if they don’t also try to loot the victim organization’s treasury: According to the IRS, W-2 phishers very often now follow up with an “executive” email to the payroll or comptroller requesting that a wire transfer be made to a certain account.

“This is one of the most dangerous email phishing scams we’ve seen in a long time,” IRS Commissioner John Koskinen said. “Although not tax related, the wire transfer scam is being coupled with the W-2 scam email, and some companies have lost both employees’ W-2s and thousands of dollars.”

The Federal Bureau of Investigation (FBI) has been keeping a running tally of the financial devastation visited on companies via CEO fraud scams. In June 2016, the FBI estimated that crooks had stolen nearly $3.1 billion from more than 22,000 victims of these wire fraud schemes.

First surfacing in February 2016, the W-2 phishing scams also have netted thieves plenty of victims. At one point last year I was hearing from almost one new W-2 phishing victim each day. Some of the more prominent companies victimized by W-2 scams last year included Seagate Technology, Moneytree, Sprouts Farmer’s Market, and EWTN Global Catholic Network. Continue reading →


10
Jun 16

IRS Re-Enables ‘Get Transcript’ Feature

The Internal Revenue Service has re-enabled a service on its Web site that allows taxpayers to get a copy of their previous year’s tax transcript. The renewed effort to beef up taxpayer authentication methods at irs.gov comes more than a year after the agency disabled the transcript service because tax refund fraudsters were using it to steal sensitive data on consumers.

irsbldgDuring the height of tax-filing season in 2015, KrebsOnSecurity warned that identity thieves involved in tax refund fraud with the IRS were using irs.gov’s “Get Transcript” feature to glean salary and personal information they didn’t already have on targeted taxpayers. In May 2015, the IRS suspended the Get Transcript feature, citing its abuse by fraudsters and noting that some 100,000 taxpayers may have been victimized as a result.

In August 2015, the agency revised those estimates up to 330,000, but in February 2016, the IRS again more than doubled its estimate, saying the actual number of victims was probably closer to 724,000.

So exactly how does the new-and-improved Get Transcript feature validate that taxpayers who are requesting information aren’t cybercriminal imposters? According to the IRS’s Get Transcript FAQ, the visitor needs to supply a Social Security number (SSN) and have the following:

  • immediate access to your email account to receive a confirmation code;
  • name, birthdate, mailing address, and filing status from your most recent tax return;
  • an account number from either a credit card, auto loan, mortgage, home equity loan or home equity line of credit;
  • a mobile phone number with your name on the account.

“If you previously registered to use IRS Get Transcript Online, Identity Protection PIN, Online Payment Agreement, or ePostcard online services, log in with the same username and password you chose before,” the IRS said. “You’ll need to provide a financial account number and mobile phone number if you haven’t already done so.”

The agency said it will then verify your financial account number and mobile phone number with big-three credit bureau Equifax. Readers who have taken my advice and placed a security freeze on their credit files will need to request a temporary thaw in that freeze with Equifax before attempting to verify their identity with the IRS. Continue reading →


3
May 16

Fraudsters Steal Tax, Salary Data From ADP

Identity thieves stole tax and salary data from payroll giant ADP by registering accounts in the names of employees at more than a dozen customer firms, KrebsOnSecurity has learned. ADP says the incidents occurred because the victim companies all mistakenly published sensitive ADP account information online that made those firms easy targets for tax fraudsters.

adpPatterson, N.J.-based ADP provides payroll, tax and benefits administration for more than 640,000 companies. Last week, U.S. Bancorp (U.S. Bank) — the nation’s fifth-largest commercial bank — warned some of its employees that their W-2 data had been stolen thanks to a weakness in ADP’s customer portal.

ID thieves are interested in W-2 data because it contains much of the information needed to fraudulently request a large tax refund from the U.S. Internal Revenue Service (IRS) in someone else’s name. A reader who works at U.S. Bank shared a letter received from Jennie Carlson, the financial institution’s executive vice president of human resources.

“Since April 19, 2016, we have been actively investigating a security incident with our W-2 provider, ADP,” Carlson wrote. “During the course of that investigation we have learned that an external W-2 portal, maintained by ADP, may have been utilized by unauthorized individuals to access your W-2, which they may have used to file a fraudulent income tax return under your name.”

The letter continued:

“The incident originated because ADP offered an external online portal that has been exploited. For individuals who had never used the external portal, a registration had never been established. Criminals were able to take advantage of that situation to use confidential personal information from other sources to establish a registration in your name at ADP. Once the fraudulent registration was established, they were able to view or download your W-2.”

U.S. Bank spokesman Dana Ripley said the letter was sent to a “small population” of the bank’s more than 64,000 employees. Asked to comment on the letter from U.S. Bank, ADP confirmed that the fraud visited upon U.S. Bank also hit “a very small subset” of the ADP’s total customers this year.

ADP emphasized that the fraudsters needed to have the victim’s personal data — including name, date of birth and Social Security number — to successfully create an account in someone’s name. ADP also stressed that this personal data did not come from its systems, and that thieves appeared to already possess that data when they created the unauthorized accounts at ADP’s portal.

ADP Chief Security Officer Roland Cloutier said customers can choose to create an account at the ADP portal for each employee, or they can defer that process to a later date (but employers do have to chose one or the other, Cloutier said).

According to ADP, new users need to be in possession of two other things (in addition to the victim’s personal data) at a minimum in order to create an account: A custom, company-specific link provided by ADP, and a static code assigned to the customer by ADP.

The problem, Cloutier said, seems to stem from ADP customers that both deferred that signup process for some or all of their employees and at the same time inadvertently published online the link and the company code. As a result, for users who never registered, criminals were able to register as them with fairly basic personal info, and access W-2 data on those individuals. Continue reading →


7
Mar 16

IRS Suspends Insecure ‘Get IP PIN’ Feature

Citing ongoing security concerns, the Internal Revenue Service (IRS) has suspended a service offered via its Web site that allowed taxpayers to retrieve so-called IP Protection PINs (IP PINs), codes that the IRS has mailed to some 2.7 million taxpayers to help prevent those individuals from becoming victims of tax refund fraud two years in a row. The move comes just days after KrebsOnSecurity first exposed how ID thieves were abusing the service to revisit tax refund on innocent taxpayers two years running.

irsbldgLast week, this blog told the story of Becky Wittrock, a certified public accountant (CPA) from Sioux Falls, S.D., who received an IP PIN in 2014 after crooks tried to impersonate her to the IRS. Wittrock said she found out her IP PIN had been compromised by thieves this year after she tried to file her tax return on Feb. 25, 2016. Turns out, the crooks beat her to the punch by more than three weeks, filing a large refund request with the IRS on Feb. 2, 2016.

The problem, as Wittrock’s case made clear, is that IRS allows IP PIN recipients to retrieve their PIN via the agency’s Web site, after supplying the answers to four easy-to-guess questions from consumer credit bureau Equifax. These so-called knowledge-based authentication (KBA) or “out-of-wallet” questions focus on things such as previous address, loan amounts and dates and can be successfully enumerated with random guessing. In many cases, the answers can be found by consulting free online services, such as Zillow and Facebook.

In a statement issued Monday evening, the IRS said that as part of its ongoing security review, the agency was temporarily suspending the Identity Protection PIN tool on IRS.gov.

“The IRS is conducting a further review of the application that allows taxpayers to retrieve their IP PINs online and is looking at further strengthening the security features on the tool,” the agency said. Continue reading →


1
Mar 16

Thieves Nab IRS PINs to Hijack Tax Refunds

Last year, KrebsOnSecurity warned that the Internal Revenue Service‘s (IRS) solution for helping victims of tax refund fraud avoid being victimized two years in a row was vulnerable to compromise by identity thieves. According to a story shared by one reader, the crooks are well aware of this security weakness and are using it to revisit tax refund fraud on at least some victims two years running — despite the IRS’s added ID theft protections.

irsbldgTax refund fraud affects hundreds of thousands — if not millions — of U.S. citizens annually. It starts when crooks submit your personal data to the IRS and claim a refund in your name, but have the money sent to an account or address you don’t control.

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.

The IRS’s preferred method of protecting tax refund victims from getting hit two years in a row — the Identity Protection (IP) PIN — has already been mailed to some 2.7 million tax ID theft victims. The six-digit PIN must be supplied on the following year’s tax application before the IRS will accept the return as valid.

As I’ve noted in several stories here, the trouble with this approach is that the IRS allows IP PIN recipients to retrieve their PIN via the agency’s Web site, after supplying the answers to four easy-to-guess questions from consumer credit bureau Equifax.  These so-called knowledge-based authentication (KBA) or “out-of-wallet” questions focus on things such as previous address, loan amounts and dates and can be successfully enumerated with random guessing.  In many cases, the answers can be found by consulting free online services, such as Zillow and Facebook.

Becky Wittrock, a certified public accountant (CPA) from Sioux Falls, S.D., said she received an IP PIN in 2014 after crooks tried to impersonate her to the IRS.

Wittrock said she found out her IP PIN had been compromised by thieves this year after she tried to file her tax return on Feb. 25, 2016. Turns out, the crooks beat her to the punch by more than three weeks, filing a large refund request with the IRS on Feb. 2, 2016. 

“So, last year I was devastated by this,” Wittrock said, “But this year I’m just pissed.”

Wittrock said she called the toll-free number for the IRS that was printed on the identity theft literature she received from the year before.

“I tried to e-file this weekend and the return was rejected,” Wittrock said. “I received the PIN since I had IRS fraud on my 2014 return. I called the IRS this morning and they stated that the fraudulent use of IP PINs is a big problem for them this year.”

Wittrock said that to verify herself to the IRS representative, she had to regurgitate a litany of static data points about herself, such as her name, address, Social Security number, birthday, how she filed the previous year (married/single/etc), whether she claimed any dependents and if so how many. 

“The guy said, ‘Yes, I do see a return was filed under your name on Feb. 2, and that there was the correct IP PIN supplied’,” Wittrock recalled. “I asked him how can that be, and he said, ‘You’re not the first, we’ve had many cases of that this year.'”

According to Wittrock, the IRS representative shared that the agency wouldn’t be relying on IP PINs for long.

“He said, ‘We won’t be using the six digit PIN next year. We’re working on coming up with another method of verification’,” she recalled. “He also had thrown in something about [requiring] a driver’s license, which didn’t sound like a good solution to me.” Continue reading →


26
Feb 16

IRS: 390K More Victims of IRS.Gov Weakness

The U.S. Internal Revenue Service (IRS) today sharply revised previous estimates on the number of citizens that had their tax data stolen since 2014 thanks to a security weakness in the IRS’s own Web site. According to the IRS, at least 724,000 citizens had their personal and tax data stolen after crooks figured out how to abuse a (now defunct) IRS Web site feature called “Get Transcript” to steal victim’s prior tax data.

The Growing Tax Fraud MenaceThe number is more than double the figures the IRS released in August 2015, when it said some 334,000 taxpayers had their data stolen via authentication weaknesses in the agency’s Get Transcript feature.

Turns out, those August 2015 estimates were more than tripled from May 2015, when the IRS shut down its Get Transcript feature and announced it thought crooks had abused the Get Transcript feature to pull previous year’s tax data on just 110,000 citizens.

In a statement released today, the IRS said a more comprehensive, nine-month review of the Get Transcript feature since its inception in January 2014 identified the “potential access of approximately 390,000 additional taxpayer accounts during the period from January 2014 through May 2015.”

The IRS said an additional 295,000 taxpayer transcripts were targeted but access was not successful, and that mailings notifying these taxpayers will start February 29. The agency said it also is offering free credit monitoring through Equifax for affected consumers, and placing extra scrutiny on tax returns from citizens with affected SSNs.

The criminal Get Transcript requests fuel refund fraud, which involves crooks claiming a large refund in the name of someone else and intercepting the payment. 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.

As I warned in March 2015, the flawed Get Transcript function at issue required taxpayers who wished to obtain a copy of their most recent tax transcript had to provide the IRS’s site with the following information: The applicant’s name, date of birth, Social Security number and filing status. After that data was successfully supplied, the IRS used a service from credit bureau Equifax that asks four so-called “knowledge-based authentication” (KBA) questions. Anyone who succeeds in supplying the correct answers could see the applicant’s full tax transcript, including prior W2s, current W2s and more or less everything one would need to fraudulently file for a tax refund.

These KBA questions — which involve multiple choice, “out of wallet” questions such as previous address, loan amounts and dates — can be successfully enumerated with random guessing. But in practice it is far easier, as we can see from the fact that thieves were successfully able to navigate the multiple questions more than half of the times they tried. The IRS said it identified some 1.3 million attempts to abuse the Get Transcript service since its inception in January 2014; in 724,000 of those cases the thieves succeeded in answering the KBA questions correctly.

The IRS’s answer to tax refund victims — the Identity Protection (IP) PIN — is just as flawed as the now defunct Get Transcript system. These IP PINS, which the IRS has already mailed to some 2.7 million tax ID theft victims, must be supplied on the following year’s tax application before the IRS will accept the return.

The only problem with this approach is that the IRS allows IP PIN recipients to retrieve their PIN via the agency’s Web site, after supplying the answers to the same type of KBA questions from Equifax that opened the Get Transcript feature to exploitation by fraudsters.  These KBA questions focus on things such as previous address, loan amounts and dates and can be successfully enumerated with random guessing.  In many cases, the answers can be found by consulting free online services, such as Zillow and Facebook.

ID thieves understand this all to well, and even a relatively unsophisticated gang engaged in this activity can make millions via tax refund fraud. Last week, a federal grand jury in Oregon unsealed indictments against three men accused of using the IRS’s Get Transcript feature to obtain 1,200 taxpayers transcripts. In total, the authorities allege the men filed over 2,900 false federal tax returns seeking over $25 million in fraudulent refunds.  The IRS says it rejected most of those claims, but that the gang managed to successfully obtain $4.7 million in illegal refunds.

Continue reading →


26
May 15

IRS: Crooks Stole Data on 100K Taxpayers Via ‘Get Transcript’ Feature

In March 2015, KrebsOnSecurity broke the news that identity thieves engaged in filing fraudulent tax refund requests with the Internal Revenue Service (IRS) were using the IRS’s own Web site to obtain taxpayer data needed to complete the phony requests. Today, IRS Commissioner John Koskinen acknowledged that crooks used this feature to pull sensitive data on more than 100,000 taxpayers this year.

Screenshot 2015-03-29 14.22.55That March story — Sign Up at IRS.gov Before Crooks Do It For You — tracked the nightmarish story of Michael Kasper, one of millions of Americans victimized by tax refund fraud each year. When Kasper tried to get a transcript of the fraudulent return using the “Get Transcript” function on IRS.gov, he learned that someone had already registered through the IRS’s site using his Social Security number and an unknown email address.

Koskinen was quoted today in an Associated Press story saying the IRS was alerted to the thieves when technicians noticed an increase in the number of taxpayers seeking transcripts. The story noted that the IRS said they targeted the system from February to mid-May, and that the service has been temporarily shut down. Prior to that shutdown, the IRS estimates that thieves used the data to steal up to $50 million in fraudulent refunds.

“In all, about 200,000 attempts were made from questionable email domains, with more than 100,000 of those attempts successfully clearing authentication hurdles,” the IRS said in a statement. “During this filing season, taxpayers successfully and safely downloaded a total of approximately 23 million transcripts.” Continue reading →


28
Apr 15

A Day in the Life of a Stolen Healthcare Record

When your credit card gets stolen because a merchant you did business with got hacked, it’s often quite easy for investigators to figure out which company was victimized. The process of divining the provenance of stolen healthcare records, however, is far trickier because these records typically are processed or handled by a gauntlet of third party firms, most of which have no direct relationship with the patient or customer ultimately harmed by the breach.

I was reminded of this last month, after receiving a tip from a source at a cyber intelligence firm based in California who asked to remain anonymous. My source had discovered a seller on the darknet marketplace AlphaBay who was posting stolen healthcare data into a subsection of the market called “Random DB ripoffs,” (“DB,” of course, is short for “database”).

Eventually, this same fraudster leaked a large text file titled, “Tenet Health Hilton Medical Center,” which contained the name, address, Social Security number and other sensitive information on dozens of physicians across the country.

AlphaBayHealthContacted by KrebsOnSecurity, Tenet Health officials said the data was not stolen from its databases, but rather from a company called InCompass Healthcare. Turns out, InCompass disclosed a breach in August 2014, which reportedly occurred after a subcontractor of one of the company’s service providers failed to secure a computer server containing account information. The affected company was 24 ON Physicians, an affiliate of InCompass Healthcare.

“The breach affected approximately 10,000 patients treated at 29 facilities throughout the U.S. and approximately 40 employed physicians,” wrote Rebecca Kirkham, a spokeswoman for InCompass.

“As a result, a limited amount of personal information may have been exposed to the Internet between December 1, 2013 and April 17, 2014, Kirkham wrote in an emailed statement. Information that may have been exposed included patient names, invoice numbers, procedure codes, dates of service, charge amounts, balance due, policy numbers, and billing-related status comments. Patient social security number, home address, telephone number and date of birth were not in the files that were subject to possible exposure. Additionally, no patient medical records or bank account information were put at risk. The physician information that may have been exposed included physician name, facility, provider number and social security number.”

Kirkham said up until being contacted by this reporter, InCompass “had received no indication that personal information has been acquired or used maliciously.”

So who was the subcontractor that leaked the data? According to PHIprivacy.net (and now confirmed by InCompass), the subcontractor responsible was PST Services, a McKesson subsidiary providing medical billing services, which left more than 10,000 patients’ information exposed via Google search for over four months.

As this incident shows, a breach at one service provider or healthcare billing company can have a broad impact across the healthcare system, but can be quite challenging to piece together. Continue reading →