Va. bill takes on tax return data breaches

(File photo)

RICHMOND, Va. (WRIC) — More and more people are ditching paper and filing their taxes online. Last year, more than 90 percent of taxpayers opted to do it digitally.

That’s how Allan Hutchinson does it.

“Normally we use TurboTax,” he said.

Hutchinson said he’s not too worried about putting his information out there, but he knows the dangers.

“Because with social security numbers — if that gets taken, you’re gone,” he said.

As data breaches become more common, how do you know your sensitive information is safe?

Del. Hala Ayala (D-Prince William) has proposed a solution that’s making its way through the General Assembly.

Her HB183 would require tax preparers to alert the Department of Taxation if there’s a data breach.

“Once you know or you have been notified there’s a breach in your network, you’re reporting it,” said Ayala. “So that we’re protecting personal, identifiable information.”

Ayala, who has spent the last 20 years working in cyber security, said her bill would save the commonwealth an estimated $300,000 a year.

“Even though tax preparers are subject to enhanced security requirements under federal law, the IRS has still reported recent data breaches of tax preparer systems in an attempt by the fraudsters to access taxpayer information and file fraudulent returns,” said Ayala.

The Department of Taxation identified more than 70 fake returns last year in Virginia, all appearing to circle back to data breaches. It’s nearly impossible for the state to recover those funds once they’ve been issued.

The Department believes the actual amount is even higher, but without a reporting requirement, they don’t know for certain.

Ayala said, when notified by tax return preparers, the state can act quickly to avoid issuing fraudulent refunds.

HB183 passed unanimously in the House of Delegates. It also got unanimous support from the Senate Finance Committee Tuesday morning and now heads to the Senate floor.

A similar bill in the Senate, SB271, was introduced by Sen. Janet Howell (D-Reston).

Last year, the General Assembly passed legislation requiring companies to report breaches of payroll data. That was estimated to save $800,000 in unrecoverable fraudulent returns.

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