Tax season fraud is set to spike in 2024 as AI enables cybercriminals to generate lifelike images and make convincing videos that impersonate taxpayers to steal their refunds. Victims of tax-related identity theft wait an average of 19 months for the IRS to correct and send their refunds, Axios reports. Scammers gather information about people — like pictures, addresses, employment status and other personal data — that is either publicly posted, available in legal or illegal databases, or stolen through email phishing. Then they file a fake tax return before you file your real one. AI lets these fraudsters make fakes faster and enables them to use more sophisticated techniques to defeat IRS and accounting firm security measures. The IRS got 294,138 complaints about identity theft in 2023 and flagged more than 1 million tax returns for possible identify fraud.
Tax identity fraud "is a great crime, because so many tax refund dollars are transacted" and it's harder to spot suspicious behavior with a once-per-year transaction, said Ari Jacoby of the cybersecurity firm Deduce. Tax professionals may also be caught off guard by cybercriminals trying to get them to hand over sensitive client data by posing as real taxpayers. Jacoby says AI is particularly difficult for the IRS and tax professionals to deal with "because it is self-learning, trying techniques and failing until it succeeds." Congress' failure to pass federal privacy legislation has also aided identity fraudsters, guaranteeing that mountains of personal data will be available. The IRS has long been criticized for inadequate technology but is using Inflation Reduction Act funding to upgrade computer systems and increase audits of the largest corporate taxpayers — typically partnerships with more than $10 billion in assets.