In the intricate web of financial transactions, tax season unveils a concerning trend — the alarming growth of child identity theft. As adults diligently prepare their tax returns, the vulnerability of children’s personal information becomes increasingly exploited. Continue reading to learn about the contributing factors to the surge in child identity theft during tax season, examining the unique risks and consequences that this phenomenon poses.

Reasons for Increased Risk of Child Identity Theft During Tax Season

The heightened risk of child identity theft during tax season is primarily due to the enticing incentives, easy access to children’s information, and lower detection rates.

Temptation of Tax Credits and Refunds

The promise of financial gain incentivizes identity thieves to exploit the vulnerability of children’s personal information. As adults, we eagerly seek tax-related benefits. Criminals recognize and see the opportunity to target the unsuspecting identities of minors for their financial gain. Most tax returns and refunds get approved well before the tax form is analyzed, allowing the perfect opportunity for criminals to take the money and run.

Easier Access to Your Child’s Information

Your child’s information is not something to just be thrown into a file or holder. It needs to be kept with important documentation, such as birth certificates, which would typically get passed over once a child turns 18. If you decide to get rid of important documents, shred them before disposing of them. If your computer or phone contains personal information about your child, delete and wipe clean before getting rid of your computer or cell phone.

Be wary of the content that is posted on social media. A simple data breach involving your child’s school, doctor’s office, or other official agencies can put your child at risk of their information becoming exposed. Help protect your children by limiting what you post online as well as what they share online as well.

Lower Detection Rates

The surge in tax-related activities creates a chaotic environment, allowing identity thieves to exploit the distractions.. Often, this activity may go unnoticed or receive delayed attention due to the size of the financial institution or tax agency. This can enable criminals to manipulate the needed information without immediate detection.

Many parents may also be unaware of the likelihood of this crime occurring. Due to the child having no credit history, these actions often go overlooked.

How to Help Protect Your Child During Tax Season

Being mindful and aware are the most simple ways to help protect your child during tax season. Taking precautions and investing in protective measures can help mitigate the risk of potential identity theft. By taking these preventive steps, you can significantly help reduce the vulnerability of your child’s identity.

Parental Awareness and Monitoring

It is extremely important to be cautious when sharing your children’s information. Remain up to date and informed about potential scams targeting children and educate your child on the importance of online safety. Information such as Social Security numbers, birth certificates, and other sensitive information should all be handled extremely carefully.

Access to these physical documents should be very limited and protected. Not only should the physical documents be protected, but online sharing should be kept minimal regarding personal information. Monitor their credit reports regularly, even though they may not have an extensive credit history. Utilize available security features, such as credit freezes, to help add an extra layer of protection.

Tax Filing Precautions

When filing your taxes, opt for a well-established and reputable tax filing platform, whether that be in-person or online. It is important to verify their security features to help ensure the protection of your sensitive information. Inquire if they use multi-factor authentication and encryption features as additional security.

Additional Protective Measures

In previous years, it was a common occurrence for parents to give out their child’s Social Security number to the doctors, an after-school program, or even a sports team. However, you no longer need to. You can protect and hide your child’s sensitive information to help prevent negative effects from taking place. Placing a freeze on your child’s credit report is another way to help enhance protection. This restricts access to their credit file and acts as a deterrent against unauthorized attempts to exploit your child’s financial identity.

If you discover or suspect your child’s identity has been compromised, you need to report it to the Federal Trade Commission and the International Revenue Service immediately. Taking precautionary measures by investing in IdentityIQ credit monitoring and identity theft protection services help provide protection with real-time identity monitoring alerts.

Bottom Line

There are intricate dynamics that contribute to the escalating threat of child identity theft during tax season and the importance of protecting it. The allure of tax credits, refunds, and the easy access to children’s information creates a massive target for identity thieves. The lower detection rates during the tax season further push the lure to this crime. It is imperative to limit information sharing, monitor your credit reports, and educate both you and your children about the risks of child identity theft during tax season.

Identity theft protection, a crucial defense against the growing threat of cybercrime, has become increasingly recognized as a valuable investment in safeguarding personal information. As individuals seek ways to fortify their digital presence, there is a rising discussion around the tax deductibility of identity theft protection expenses. This consideration reflects the evolving landscape of financial regulations and the acknowledgment of the role such protective measures play in securing one’s financial well-being.

What Is Identity Theft Protection?

Identity theft protection refers to services or measures designed to safeguard personal information and help prevent unauthorized use of identity for fraudulent activities. These protective measures often include credit monitoring, fraud alerts, and assistance in the event of identity theft.

IdentityIQ identity theft protection offers services such as dark web monitoring, identity restoration support, and coverage for financial losses incurred due to identity theft. The goal is to help detect and prevent identity theft as well as minimize the damage and assist in the recovery process. They also provide financial wellness tools to help you get back on your feet. Identity theft protection services can serve as a valuable layer of defense for your safety.

Is Identity Theft Protection Tax Deductible?

The IRS released an announcement clarifying that “individuals whose personal information may have been compromised in a data breach must include in gross income the value of the identity protection services provided by the organization that experienced the data breach.”

Regardless of whether an employee or company has experienced a data breach in some sort, it is classified as a non-taxable, non-reportable benefit. While this tax deductibility does not apply to cash compensation received for identity protection services or proceeds received under an identity theft insurance policy, it is still a benefit worth considering.

Overview of Tax Deductions

Tax deductions are the expenses that you can subtract from your total income to reduce the amount of income subject to taxation. This helps lower your taxable income, potentially decreasing the amount of taxes you owe.

Although criteria can change, the most common tax deductions are business, medical, education, homeownership, charitable donations, and job-related expenses. The IRS classifies identity theft protection services as credit report and monitoring services, identity theft insurance policies, identity restoration services and other similar services. These services do not need to be reported on either W-2 or 1099-MISC forms.

FAQs

Why is identity theft protection important?

According to the IRS, identity theft protection has been the top consumer complaint to the FTC for 15 consecutive years. Identity theft can lead to financial losses, poor credit, and other serious consequences. Protection helps in early detection and prevention of such theft.

What types of expenses can be tax deductible?

Generally, expenses related to the prevention and mitigation of identity theft may be considered for tax deductions. It is essential to understand the eligibility criteria and stay informed about tax laws, as they can change, impacting the availability of deductions.

Is identity theft protection tax deductible for everyone?

The eligibility for tax deductions depends on various factors, including individual circumstances and specific criteria set by tax regulations. The cost of these services may be deductible for the companies providing them.

How do I determine if I qualify for tax deductions on identity theft protection?

Factors such as the nature of expenses, income levels, and compliance with tax regulations play a role. Due to the ever-changing rules and regulations regarding tax laws, consulting with a tax professional is advisable for personalized advice.

Can I claim tax deductions for identity theft insurance premiums?

In some cases, premiums for identity theft insurance may be considered deductible. However, it is crucial to verify eligibility based on tax laws.

Can businesses claim tax deductions for identity theft protection expenses?

Businesses may be eligible for certain tax deductions related to identity theft protection. The nature of the business and expenses incurred determines eligibility.

Bottom Line

While the concept of identity theft protection being tax deductible may seem appealing, there can be many loopholes that you need to be conscious of to follow. Companies may be able to qualify their identity theft protection as a tax deductible, however for personal use it is best to consult with a tax professional. Safeguarding personal information is crucial, therefore individuals should explore the benefits and features offered by identity theft protection services.

IdentityIQ offers smarter identity theft protection, allowing you to have 24/7 protection from scammers and cybercriminals. With one in four Americans falling victim to identity theft, it is highly advisable to help protect yourself at all costs.