What You Need to Know About the FAFSA Data Breach & Your Taxes

In the Fall of 2016, the IRS discovered a data breach related to the Free Application for Federal Student Aid, or the FAFSA. The student loan application asks for previous years’ adjusted gross income (AGI) of both the parents and the students requesting the loan. Since many applicants don’t have this information on hand, FAFSA applications had an online data retrieval tool that allowed people to import the information from the IRS.

What Happened?

It was discovered that scammers used the data retrieval tool to uncover personal information – name, address, birth date, AGI, and Social Security number – all key information needed to complete a tax return. Once the scammers had that tax information, they were able to file fraudulent tax returns in the victim’s name and steal tax refunds from the IRS. The IRS noticed the fraud because of an unusually high number of unfinished returns.

Who is Affected?

While there is no exact number, hundreds of thousands of taxpayers could have been affected by this tax scheme. The victims were not limited to those attending college or who have children in college. Anyone eligible for a college degree could have been impacted.

What Steps is the IRS Taking to Deal with This?

The IRS removed the Data Retrieval Tool in March 2017 and is in the process of sending out letters to those who may have been affected. According to The New York Times, the IRS “was planning to contact 100,000 people to alert them that they might be at risk. The agency believes that fewer than 8,000 fraudulent returns were filed and processed, resulting in refunds issued.” The fraudulent refunds issued totaled approximately $30 million.

What Should You Do to Protect Yourself?

Don’t let this breach stop you from filling out a FAFSA if you or your child need it to attend college – just be prepared to enter your AGI information manually since the tool has been taken down.

There are other steps you can take to protect yourself from tax identity theft as well. Check your credit score and credit report for any unusual activity as this can indicate signs of stolen information or fraud. Additionally, you should file taxes early to reduce the risk that someone files a return in your name first.

View more information about Tax Identity Shield® to help better protect those concerned about tax identity theft.

Already a member? Sign into your account here. If you feel you could be a victim of FAFSA tax fraud, you can also call to apply for IRS protections by calling Tax Identity Shield Support, 1-855-343-9542, MON-FRI, 10 am – 6:30 pm ET.


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