Posts Tagged: U.S. Department of Education


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.

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