COLUMBUS — While the state's chief legal officer is warning Ohioans to avoid scams this tax season, there is a company in Hudson that works to protect its clients from online threats.
Since January, the Attorney General’s Office has received about 190 reports of tax-related scams.
“Con artists are very good at what they do,” Attorney General Mike DeWine said recently. “They rely on scare tactics and surprise. When people get scared, they do irrational things. That’s why we want people to know the warning signs. Awareness can make all the difference.”
Tax identity theft is a common tax scam, according to the AG's office. Tax identity theft generally occurs when someone steals personal information to file a tax return and fraudulently obtain a refund. This year, there are extra concerns about tax identity theft because of data breaches that have exposed individuals’ Social Security numbers and other sensitive information, according to DeWine.
Dan McNemar, director of intelligence for Binary Defense on Aurora Street in Hudson, said that through his monitoring of the dark web he sees many listings for personal information stolen from companies by computer hackers. These are forms stolen from the companies that contain all the information from last year's tax forms to file a bogus tax return.
Basically, someone hacked into a company's computer database and stole all of its tax records.
“It's going to have your income, your gross income, date of birth — everything that's on the W-2, and you just pick what you want,” said McNemar, calling up examples on his laptop and projecting it on a big screen on the wall. “They've already sold 80. There's 360 accounts remaining, and you pay $45 and they'll send you all the information to file someone else's tax return.”
This, in turn, provides the illegal filer with someone else's refund. McNemar said the sale of other's people's personal information is “extremely organized [and] nothing new.” He also said a dark net is where people go online to buy drugs, counterfeit jewelry, carding fraud — just about any type of seedy, seamy and always illegal service.
A dark net is any overlay network that can be accessed only with specific software, configurations, or authorization, often using non-standard communication protocols and ports, according to an online definition.
“It depends on what you're looking for,” he said. “Stolen physical pre-paid cards. [People] seeking partnerships. Basically they have a bunch of stolen information they want someone else to help them cash out. Different credit cards…” McNemar points out listings for people looking for a mentor to teach how to commit cyber crimes.
“It's pretty scary when you think about it,” he said. Prices depend on who selling what and how much. Some information is sold for as low as $2, he said. Medical records are available, as well as Pay Pal accounts and blackmail information.
Binary Defense was founded by David Kennedy, a former hacker for the NSA and Marine Corps Signal Intel Unit, as well as a former CSO for Fortune 1000 company Diebold. According to the company's web site, he started up Binary Defense to solve a global issue: hackers were able to penetrate businesses with traditional security systems easily, quickly, and repeatedly, according to the company's website.
Located at 5 Aurora St., Binary Defense has 50 employees and is a 24/7 operation housed in a 200-year-old building that was once a bank.
The dark net was developed by our government, McNemar said.
“We made it, [but] not for this reason,” he said. “It was intended to be a secure communications method for U.S. military to use for sending information around the world.”
It was abandoned by the military in the early 2000s when it became more widely used by criminals.
In its warning to Ohioans on what to beware of, the Attorney General's Office listed other tax scams including IRS impostor scams. This is the most common tax scam reported to the Ohio Attorney General’s Office. It generally begins with a phone call claiming you owe back taxes or that a warrant has been issued for your arrest. You’re told to call a certain number immediately, and eventually you’re asked to send money or to provide personal information to resolve the supposed problem.
W-2 phishing scams target employers and payroll employees. Typically, an HR or payroll employee receives an email that appears to come from the boss or the head of the organization. The email instructs the employee to send all employees’ W-2s. Although the email may appear to be legitimate, it’s actually part of a phishing scam. (The IRS warned that this scam surged in 2017 and encouraged employers to report any W-2 thefts immediately to the IRS.)
Consumers who want help detecting a potential scam should contact the Ohio Attorney General’s Office at www.OhioProtects.org or 800-282-0515. IRS or U.S. Treasury impersonation scams can be reported to the U.S. Treasury Inspector General for Tax Administration at www.treasury.gov/tigta or 800-366-4484. Tax identity theft should be reported to the IRS (for federal taxes) or the Ohio Department of Taxation (for state taxes).
Reporter Steve Wiandt can be reached at 330-541-9420, firstname.lastname@example.org or @SteveWiandt_RPC.