More than 700,000 records were breached in the IRS hack in 2015, leaving citizens vulnerable to additional identity theft and income tax fraud. The IRS is still struggling to find a way to properly identify citizens in the digital world but some states are looking to use different technology to protect citizens from having their tax returns stolen
Alabama and North Carolina are among the first states to enable citizens to use high-assurance credentials to lock down their tax returns with the states. North Carolina is doing it as part of a grant from the National Strategy for Trusted Identities in Cyberspace but Alabama was so excited about it they are paying for it. “We are paying $250,000 for it but it’s a low cost for fighting fraud,” says Julie P. Magee, revenue commissioner with the state of Alabama.
MorphoTrust is providing the technology that enables citizens to lock down their tax returns. Citizens have to download the MorphoTrust eID app and scan the front and back of their driver licenses with their smartphone, says Mark DiFraia, senior director of solutions strategy at the company. The document scanned is authenticated and then the user takes a selfie to match the photo taken with the one on the document that was scanned.
That information is also checked against what the state has on record. If everything matches a credential is issued to the mobile device. Then when logging on to the state site instead of entering a user name and password the citizen authenticated to the app with the selfie and then scans a QR code from the site that enable access.
In the instance of the tax return, once the return has hit the Department of Revenue the citizen will be notified. They login to the site as a final step to authorize the transaction.
With 92% of tax returns filed electronically something to link the identity of the person to the return has become essential, Magee says. The eID system will be in place for next year’s returns but Alabama previously implemented a knowledge-based authentication quiz to try and stop fraud as well as enabling citizens to be alerted when their return was filed. If they were alerted and they hadn’t filed the citizens had to call a hotline.
That quiz and alerts will remain in place as Magee expects it to take some time before there’s widespread adoption of the eID. The Department of Revenue is going to work with the University of Alabama to create a marketing campaign to get the word out about the new system, Magee says.
While the use of the eID will be limited for now Magee has high hopes for it in the future. “User names and passwords are so easily obtained by hackers,” she explains. “And as people grow more comfortable with this we will be able to replace user names and password with this app.”