Up to 100,000 fifiles tied to student aid possibly were stolen

IRS chief says data site hacked to fifile fraudulent returns.

Internal Revenue Service Commissioner John Koskinen said Thursday the information of up to 100,000 taxpayers may have been stolen in a security breach of an online tool used to apply for federal student aid.

Te s t i f y i n g b e f o r e t h e Senate Finance Committee, Koskinen said the IRS identifified suspicious activity in the fifiles of people who were using a “data retrieval tool” as they fifilled out the Free Application for Federal Student Aid.

FAFSA is the form the government and colleges use to determine fifinancial aid for millions of students.

The web-based IRS data tool lets people upload tax-return information, but the and Education Department disabled it in March after identity thieves tried to use personal information from it to fifile fraudulent tax returns. Koskinen told lawmakers that about 8,000 fraudulent refunds were issued, totaling 30 million. The IRS prevented another 14,000 illegal refunds from going out the door and halted action on 52,000 other returns.

The agency is notifying about 100,000 taxpayers of the possible breach, although some of the FAFSA applications that were flflagged for suspicious activity are legitimate, Koskinen said.

Security concerns about the data retrieval tool fifirst emerged in September at the

according to the agency head. Offifficials learned that with relatively little stolen information, identity thieves could pretend to be students, start the fifinancial aid application, and give permission for the to populate the form with tax data that could then be used to fifile fraudulent returns. The IRS alerted the Education Department in October, the same month that the FAFSA application went live. The agencies monitored the situation, but were reluctant to disable a tool that helps families avoid tedious paperwork.

“We agreed with ( Education offifficials) since we did not have, at that time, any volume of criminal activit y that rather than shutting it down and add to the burden of people applying for fifinancial aid, we, with them, would monitor that system,” Koskinen said. But I told them that as soon as there was any indication of criminal activity, we would have to take that application down.”

By mid-February, Koskinen said it became clear that

there was a pattern of activity … that was clearly not consistent with people going on to actually apply for student loans.” He said that upon further review some of that activity was just students who started but failed to complete the application, while some of it was indeed criminal. Within weeks of taking the tool offlffline, the IRS and Education Department decided to disable it until October to put stronger protections in place.

Applicants can fifill out the paper FAFSA form or use the online version and manually enter tax data. But student advocates worry that both of those options will lead to errors.

And that could lead to students being asked to verify information with additional documents, a time-consuming process that could take them out of the running for aid awarded on a fifirst- come, fifirst-served basis.

Lawmakers have asked st ates to push back their financial aid deadlines in light of the shutdown, since most jurisdictions rely on the FAFSA to dispense grants. Colleges and universities typically want the FAFSA data by March to help them divvy up their own aid dollars.