AI Data Security Risks for Medium Businesses: What You Need to Know

Visual representation of AI data security risks for medium-sized businesses, showing digital threats and physical document shredding as a data protection solution.

Artificial intelligence (AI) is unlocking new efficiencies, smarter customer engagement, and stronger decision-making across industries. It’s also exposing serious new vulnerabilities, especially for small and medium businesses. In short, AI data security risks for medium businesses are on the rise.

With more data, more employees, and more connected systems than ever, medium businesses are increasingly attractive targets for cyberattacks. And while many already invest in security tools and IT providers, the complexity of today’s AI-driven cyber threats demands a new level of awareness and protection.

Here’s a closer look at the AI data security risks for medium-sized businesses, and how to prepare your company for what’s coming next.

The Expanding Role of AI in Business Operations

Mid-sized businesses are adopting AI to gain competitive advantages in areas like:

Automated customer support and chatbots
Predictive sales analytics
Smart inventory and supply chain forecasting
Natural language tools for HR and internal communication
AI-enhanced data protection and monitoring

While these tools support growth, they also increase your attack surface and expose sensitive data across departments and systems.

AI-Powered Risks You Can’t Ignore

The following threats represent the most pressing cybersecurity risks for mid-sized companies using AI:

Deepfake Executive Impersonation. AI-generated deepfakes are becoming a popular tool for cybercriminals. A realistic video or voice recording impersonating an executive can be used to trick employees into wiring funds or sharing sensitive information. When leadership is remote or less visible, the risk of unauthorized access spikes.
AI-Enhanced Phishing Attacks. Phishing is nothing new, but AI has supercharged it. Hackers now use generative AI to craft emails that mimic your internal language, making them harder to spot. These phishing attacks are often paired with social engineering tactics and may target endpoints such as laptops, mobile devices, or Wi-Fi-connected systems. Here is a chilling article from Malwarebytes on how to recognize AI-generated phishing emails.
Ransomware-as-a-Service (RaaS). Criminal networks now offer plug-and-play ransomware kits powered by AI. These kits allow less-skilled actors to launch complex ransomware attacks, targeting mid-sized businesses with limited in-house resources. These attacks can lead to catastrophic data loss and financial losses, especially if backups aren’t properly secured.
Vulnerable Internet of Things (IoT) Devices. From smart thermostats to connected security systems, AI-powered malware can exploit overlooked vulnerabilities in IoT devices. Once inside, attackers can move laterally through your network, bypassing firewalls and accessing confidential data.
Shadow IT and Third-Party AI Tools. Departments may deploy AI tools without proper vetting. These apps often have unclear security policies or insufficient access control, putting your cybersecurity posture at risk. Without a formal risk assessment, even a well-intentioned tool can become a gateway for unauthorized access or data breaches.
Internal Weak Points You Can’t Ignore. Several in-house dynamics increase AI-related cybersecurity risk:
- Security measures vary across departments, with no unified oversight
- Lack of consistent employee training in AI threats or incident response plans
- Overreliance on outdated antivirus software or inconsistent use of VPNs
- Growing endpoint sprawl: more devices, more risk

Strengthening Your Cybersecurity Strategy

A strong cybersecurity strategy doesn’t have to mimic a Fortune 500 blueprint. These steps can significantly improve your security posture:

Create standardized AI usage policies. Apply uniform security measures for all departments using AI.
Conduct regular updates and patching. Apply updates to all operating systems, apps, and firmware.
Require multi-factor authentication (MFA). Combine strong passwords with MFA to secure employee accounts.
Use layered defenses. Combine firewalls, real-time threat detection, encryption, and access control.
Train employees continuously. Help them identify phishing attacks, deepfakes, and suspicious activity.
Verify vendors. Choose security services with a track record in AI and mid-market protection.
Secure backups. Keep backups offsite or in a segregated cloud location to recover quickly from cyberattacks.

Don’t Forget Physical Security

Many medium-sized businesses still handle sensitive information in printed form, such as client records, financial documents and employee data. Improper disposal of this paperwork creates real-world vulnerabilities.

Include secure document destruction in your overall risk management strategy. Professional shredding reduces your exposure and supports compliance.

Final Thoughts: Own the Risk Before It Owns You

AI presents exciting opportunities, but also introduces new and fast-evolving cyber threats. By investing in your people, your policies, and your protections, you can take control of your cybersecurity posture and protect what matters most.

Whether you’re protecting internal systems or guarding customer trust, a strong AI-aware cybersecurity foundation is no longer optional. It’s your frontline defense against tomorrow’s risks.

If you own or manage a smaller company, the AI threat landscape looks a little different. Explore our Guide to AI Threats for Small Businesses.

Why should my business shred business documents?

Shredding Services in St. Louis: Why should my business shred business documents?

When it comes to protecting your business’s sensitive documents and customer information, the old days are sounding pretty good, aren’t they? Technology and smart criminals have made shredding services in St. Louis a critical part of a businesses operations.

It really hasn’t been that long since we were worried about someone going through our trash to steal financial information such as bank statements, credit card information, tax records, private information, customer data, and other confidential information.

Then came the cyber criminals attacking the world’s largest companies, which continues to this day. And with this came an explosion of bad actors attacking businesses of all sizes, including the smallest of businesses.

As business owners (and consumers), make no mistake we are under attack. In fact, according to a recent report from IBM, the average cost of a data breach in 2023 reached an all-time high of $4.45 million. Even small businesses are not immune, as nearly 60% of small businesses shut down within six months of a major breach.

This article focuses on the purging of old records and information, whether in paper or electronic form. As experts in shredding services in St. Louis, We will give you some ideas and tips on how to reduce your risk and some cost-effective ideas to save you a little money along the way. Also, learn more in our new guide: how data privacy regulations are changing to protect businesses.

So, whether your business is an old hand when it comes to purging (but might be a little tardy in keeping up), or you haven’t pulled the trigger, this article should give you encouragement to shred business documents.

What is document purging?

Document purging—many call it document shredding—is the systematic elimination of outdated or unnecessary secure documents from a company’s records inventory. While many people associate this with paper shredding, purging also includes secure digital file destruction. This encompasses physical documents, such as paper records, and digital files stored in hard drives.

In short, regular document purging serves as a proactive measure to manage information overload, maintain data security, and ensure compliance with regulations.

As a leader in shredding services in St. Louis, we recommend at least one purge per year for most businesses, some even more often if they store highly confidential documents. By systematically identifying and disposing of obsolete documents, businesses can streamline their operations, optimize storage space, and mitigate the risks associated with unauthorized access to sensitive information.

We recommend our clients establish clear policies and procedures for both physical document destruction and digital records.

Now let’s dive into the details.

Why should you shred business documents with sensitive information?

Many companies hold on to the old ways of securing business documents, which is often simply storing them in boxes or file cabinets in an unused office or an off-site document storage facility.

Following are five good reasons not to do that:

1. Data Security. A security breach can have far-reaching implications, from the obvious fallout of your sensitive information getting into the hands of bad guys to your company’s reputation being tarnished. Data breaches often lead to financial losses, legal trouble, and long-term damage to customer trust. Whoever said there is no such thing as bad publicity didn’t know what they were talking about.

2. Regulatory Compliance. Every business has some level of regulations it must follow; some more than others, like financial institutions and healthcare. The Health Insurance Portability and Accountability Act (HIPAA) is a well-known example. Failing to comply with these regulations can result in hefty fines and lawsuits, as well as increased scrutiny from regulatory bodies.

3. Space Management. Office space is pricey these days. In St. Louis, it is common to pay more than $20 per square foot, and even much more in higher demand areas. Why should valuable office space be taken by piles of boxes? The accumulation of paper and electronic records not only clutters workspaces, it clutters your IT systems. It breeds inefficiency and drains productivity. Shred business documents as soon as you can!

4. Environmental Benefits. Recycling paper and electronics through regular shredding and disposal reduces your impact on the environment. Partnering with a shredding company that offers eco-friendly disposal methods can enhance your company’s sustainability efforts.

5. Save Money. Depending on how far behind you are, you may be able to save on storage costs or external storage when you shred business documents. Regular disposal will also help keep you away from non-compliance of regulations, which could be very expensive. Additionally, reducing clutter improves workflow efficiency, potentially saving your business time and money in the long run.

Regular document purging and shredding is beginning to sound pretty good, isn’t it?

Let’s talk today about securely destroying important information

The Role of Artificial Intelligence (AI) in Document Security

Artificial intelligence is transforming the way businesses protect sensitive documents (and giving bad actors that want to steal it new ways to do it). See our recent article on how you can better manage the risks of AI impacting your small to medium business.

AI-powered tools can monitor access to digital files in real time, detecting anomalies and potential data breaches before they occur. Additionally, AI can automate document categorization, helping businesses ensure compliance with retention policies by flagging files that should be deleted or archived.

However, AI also presents new risks, including AI-generated phishing scams that trick employees into exposing sensitive information. Businesses should leverage AI responsibly to enhance security rather than create vulnerabilities.

We are continually adding new capabilities to go with our shredding services in St. Louis.

Legal and Financial Ramifications of Poor Document Management

Failing to properly dispose of sensitive documents can lead to severe legal and financial consequences.

Companies have faced multi-million-dollar fines for non-compliance with regulations like HIPAA, FACTA, and GDPR. In 2023, a healthcare company was fined $1.25 million for failing to securely dispose of patient records. Beyond fines, businesses also risk lawsuits from customers and vendors whose data is exposed due to improper document handling. A strong document retention and destruction policy can help prevent these costly mistakes.

Cyber Threats Beyond Document Storage

Cybercriminals don’t just target online databases—they exploit weaknesses in document storage and disposal.

Ransomware attacks often begin when hackers gain access to outdated or unprotected business records. Social engineering tactics, including AI-generated deepfake scams, trick employees into granting access to sensitive documents.

Businesses must be proactive by securing both physical and digital records to prevent data from becoming a liability. Implementing secure digital erasure techniques and partnering with a trusted document destruction service are key steps in mitigating these risks. And, shred unnecessary business documents as soon as possible.

One final thought. We haven’t focused much on what happens to a customer’s trust in your business if your data—their data—is stolen. No matter how well you clean up the mess, there will always be a lingering doubt.

Secure Document Destruction is a leader in shredding services in St. Louis.

Add button here: Contact us today to reduce your risks

Frequently Asked Questions

When should you shred business documents?

Businesses should shred business documents according to legal retention periods, typically every three to seven years, depending on the document type and industry regulations. Sensitive documents should be shredded as soon as they are no longer needed. Read some eye-popping issues on how bad actors are trying to scam your tax returns.

Does anyone shred documents for free?

Some community shredding events offer free shredding services in St. Louis, often hosted by local governments or businesses. However, for ongoing business needs, professional shredding services in St. Louis provide the most secure option.

What types of business documents should be shredded?

Shred business documents containing sensitive business, financial, or personal information, such as tax returns and tax records, employee files, client information, and bank statements.

What are the benefits of business shredding services in St. Louis?

Shredding protects against identity theft, ensures regulatory compliance, frees up office space, and helps maintain business security. Onsite shredding is the most secure method. Shred bins are placed throughout your business and are emptied on a regular schedule. See more insight on document shredding for businesses: onsite versus offsite shredding.

The shredding process is straightforward. A shred truck comes to your business location, the bins are emptied into the truck and everything is shredded at that time. Offsite shredding is a process where your documents are loaded into a truck and taken to an offsite drop-off location to be shredded at a later time.

What is the best way to shred a large volume of business documents?

For large volumes, document shredding services are the most efficient and secure option. SDD of St. Louis only provides onsite shredding, which we believe is the most effective method. Customers receive a certificate of destruction when the job is completed, providing further peace of mind.

Navigating Data Privacy Regulations in 2025: A Guide for Businesses

With technology becoming more complicated every day, understanding data privacy regulations for businesses is critical for businesses of all sizes, but especially so for small and medium-sized businesses (SMBs).

As technology emboldens criminals, regulations evolve trying to keep up and the volume of data increases, SMBs are often left to adapt on their own. It’s a slippery slope to try to protect sensitive information, maintain customer trust and avoid legal penalties. This guide explores the key data privacy challenges SMBs face, the role of emerging technologies in this digital age, and the best practices to ensure compliance with current data privacy laws.

Key Data Privacy Challenges for SMBs

SMBs often struggle with data privacy due to limited resources and expertise. Here are some common issues they face:

Inadequate Data Protection Policies: Many SMBs lack comprehensive policies for handling personal data. For instance, a small business might not have clear guidelines on how to manage and store customer information securely.
Inconsistent Employee Training: Without proper training, employees are likely to mishandle sensitive data or fall victim to phishing scams. For example, an employee might unknowingly click on a malicious link, opening the company to hackers and compromising its data security.
Insufficient Security Measures: SMBs often don’t invest enough in robust cybersecurity infrastructure, leaving them vulnerable to attacks. A common scenario is using outdated software that lacks the necessary security updates to fend off new threats.
Poor Document Disposal Practices: Improper disposal of physical and electronic documents can lead to data breaches. An example is throwing old customer records into the trash without shredding them, which could allow unauthorized access to personal information. This is not the way to build trust with customers.
Failure to Stay Updated on Regulations: With data privacy laws constantly changing, SMBs may struggle to keep up. This could result in non-compliance, as seen when businesses are unaware of new state-specific laws taking effect.

The Role of Emerging Technologies in Data Privacy

Emerging technologies significantly impact data privacy, adding complexity to how businesses manage and protect information.

The rapid advancement of technology brings both opportunities and challenges for SMBs in safeguarding data. Here is how some of these technologies are influencing data privacy:

Internet of Things (IoT) Devices: These devices collect vast amounts of data, often without clear guidelines on data usage. For example, a small retail store using smart sensors to track customer behavior must consider how this data is stored and protected to prevent unauthorized access.
Artificial Intelligence (AI): AI systems process large datasets to provide insights, but without adequate safeguards, they can expose sensitive information. A medium-sized marketing firm utilizing AI to analyze customer trends must ensure that personal data is anonymized and securely handled to avoid data breaches.
Advanced Cyber Threats: As technology evolves, so do cyber threats. SMBs must be vigilant against sophisticated attacks like ransomware and data breaches. A small healthcare provider could face severe consequences if patient data is compromised due to inadequate security measures.

These technologies demand that SMBs stay updated on the latest developments and adopt robust data protection strategies to mitigate risks.

Overview of Current Data Privacy Laws

GDPR and Its Global Impact

The General Data Protection Regulation (GDPR) in the European Union has a global impact, even on SMBs in the U.S. It applies to any business that processes the personal data of individuals in the EU, regardless of the business’s location.

U.S.-based SMBs offering goods or services to EU residents or monitoring their behavior must comply with GDPR. Moreover, GDPR has set a high standard for data protection, influencing other jurisdictions, including U.S. states, to adopt similar stringent regulations.

U.S. Data Privacy Regulations

In the United States, data privacy laws vary by state, creating a complex landscape for businesses to navigate. SMBs in Missouri and Illinois must pay particular attention to their respective state laws, as well as to broader trends in U.S. privacy regulations.

Missouri: While Missouri does not have a comprehensive data privacy law, businesses must adhere to sector-specific regulations and general best practices to protect consumer data. Companies should stay alert for any legislative changes that may introduce more stringent requirements.
Illinois: Illinois is known for its Biometric Information Privacy Act (BIPA), which regulates the collection, use, and storage of biometric data. SMBs that handle biometric information must ensure compliance with BIPA to avoid legal repercussions.
Other Notable State Laws: States like California, with its California Consumer Privacy Act (CCPA), set significant precedents in data privacy. While Missouri and Illinois may not have identical laws, understanding and preparing for such regulations can help SMBs remain compliant as laws evolve.

Key Business Obligations Under Data Privacy Laws

Businesses have several obligations under data privacy laws:

Transparency and Privacy Notices: Businesses must clearly communicate how they collect, use and protect personal data. A local bakery using an online ordering system should provide customers with a detailed privacy notice outlining its data usage.
Security Measures: Implementing reasonable security measures to safeguard data like credit card numbers and phone numbers is crucial. For instance, encrypting customer data and using secure servers can help prevent unauthorized access.
Consent and Data Collection: Explicit consent must be obtained for data collection and processing for all types of data. A gym collecting members’ health information should ensure that consent forms are clear and comprehensive.
Breach Notification: In the event of a data breach, businesses are required to notify authorities and affected individuals promptly. A small law firm experiencing a data breach must follow legal protocols to mitigate damage and maintain trust.

Importance of Compliant Document Disposal Practices

Secure document disposal is essential to prevent unauthorized access to sensitive information. Improper disposal can lead to severe consequences, including data breaches and legal penalties.

Physical Documents: SMBs should implement secure shredding processes for physical documents. A financial advisor, for example, should use a cross-cut shredder to destroy outdated client records, ensuring they cannot be reconstructed. Or, many businesses simply hire document destruction firms like SDD of St. Louis.
Electronic Media: Securely wiping and destroying electronic media is equally important. A tech startup decommissioning old hard drives should employ professional data destruction services to ensure complete data elimination.

Best Practices for Ensuring Compliance

To navigate data privacy regulations effectively, business owners should adopt these best practices:

Stay Informed: Regularly update privacy practices and your knowledge of data privacy laws and regulations relevant to your business needs. This can involve subscribing to legal updates or consulting with experts. For example, attending industry seminars or workshops can provide valuable insights into upcoming regulatory changes and how they might affect your operations.
Develop Comprehensive Data Privacy Policies: Create data protection measures that cover data collection, processing, storage and disposal. A small e-commerce business should have a policy detailing how customer data is handled throughout its lifecycle, from collection to secure deletion, ensuring all stages are compliant with the latest laws and protected from cyberattacks.
Employee Training: Conduct regular training sessions to ensure staff understand and adhere to data privacy policies. For example, training customer service representatives on how to handle personal data securely can reduce the risk of data mishandling. Or, a healthcare clinic should train its employees on the importance of patient confidentiality and the specific steps to take in protecting sensitive health information.
Conduct Regular Audits and Risk Assessments: Regularly audit data practices and perform risk assessments to identify potential vulnerabilities. For example, a small manufacturing company should periodically review its data storage solutions to ensure they are secure and comply with current regulations, adjusting practices as needed based on audit findings.
Implement Strong Access Controls: Limit data access to only those employees who need it to perform their job duties. A retail business could use role-based access controls to restrict sensitive customer information to specific staff members, reducing the risk of unauthorized access.
Build an Internal Capability. Depending on your company’s size, having a full-time data protection officer could be money well spent. If not full-time, look for firms who can provide this expertise and help you develop a data privacy program.
Partner with Reputable Data Disposal Services: Engage certified professionals such as Secure Document Destruction of St. Louis for secure document and electronic data destruction. This is particularly important for businesses dealing with large volumes of sensitive information, such as legal or financial firms. Read our recent post on the benefits of secure onsite shredding services for businesses.

By understanding data protection laws and the impact of emerging technologies, SMBs can effectively navigate the complex landscape of data privacy regulations. Proactive measures, including secure document disposal and staying informed about regulatory changes, will help businesses safeguard their data and build a reputation for reliability and trustworthiness.

Data security in small business: Threats from artificial intelligence

Article updated January 20, 2025

Data security in small business is starting to feel the impacts of artificial intelligence (AI).

AI is rapidly reshaping how businesses operate, bringing both incredible opportunities and significant risks. For small businesses, it’s vital to understand the dual role AI plays in driving innovation in data protection while potentially threatening data security and security practices.

Here’s the harsh truth about AI: it is both a friend and foe to your business. Let’s explore its advantages, the risks of its adversarial role, potential threats and how you can protect your business.

Benefits of AI for Data Security in Small Business

AI’s transformative potential is undeniable, especially ~~for medium and~~ small business owners looking to optimize operations and enhance customer relationships. Here are some key advantages:

Efficiency and Automation: AI can handle repetitive tasks, allowing you to focus on the most important components of your business.
Smarter Insights: With its ability to analyze vast amounts of data quickly, AI helps uncover trends and improve decision-making.
Enhanced Customer Service: AI-powered chatbots and virtual assistants provide 24/7 customer support, improving customer satisfaction.
Personalized Marketing: AI tailors marketing strategies to individual customers, boosting engagement and sales.
Cost Savings: Automating tasks with AI can reduce operational costs and free up valuable resources.

Risks of AI for Data Security in Small Business

While AI offers many benefits for data security in small business, it also introduces new security challenges. Below are some of the most pressing concerns for small businesses:

1. AI-Driven Cyberattacks

Cybercriminals are leveraging AI to launch sophisticated cybersecurity and phishing attacks. For instance, AI can create highly convincing phishing emails, mimicking your company’s communications to deceive customers or employees.

Traditional spam filters and firewalls often struggle to detect these advanced tactics. And, the new capabilities of generative AI (e.g. ChatGPT and many others) are making the problems even worse.

To combat this, small businesses need robust cybersecurity tools and security measures, such as AI-driven threat detection systems, that evolve alongside these threats to protect customer information and data loss.

2. Resource Constraints

Investing in AI-enhanced security tools can strain the budgets for data security in small busnesses. However, solutions like managed security services or open-source AI tools can provide cost-effective ways to stay protected from cyber security risks to critical data. Partnering with experienced vendors and security teams specializing in AI-driven cybersecurity can also bridge the resource gap.

3. Data Security in Small Business Privacy Concerns

AI relies on large data sets to function, but mishandling sensitive information can lead to data breaches or regulatory violations. For example, improperly configured AI tools in healthcare or finance could inadvertently expose sensitive data, which will significantly impact your customer trust.

Protect your business from scams by implementing strong encryption, access controls and AI systems designed to prioritize privacy.

4. Lack of Expertise

The use of AI is growing dramatically, and finding skilled professionals to manage and secure AI systems is challenging. Outsourcing to consultants or training existing staff in AI basics can help close this knowledge gap.

5. Insider Threats to Data Security in Small Business

AI technology can monitor employee activity to detect unusual behavior, but implementing these systems without transparency can harm trust. Be clear in your employee training about how and why AI is being used and establish ethical boundaries to ensure employees feel respected.

6. Ethical Challenges are Real with AI

AI isn’t perfect. It can make mistakes or reflect biases embedded in the data it learns from. Small businesses need to ensure that AI tools are used responsibly, avoiding scenarios that could harm their reputation, invite legal consequences or create financial losses.

Emerging AI threats Small Businesses Need to Know

In the last 18 months, new AI-related risks have emerged, including:

Deepfake Technology: Cybercriminals can use AI to create convincing fake videos or audio, leading to fraud or reputational damage.
Ransomware-as-a-Service (RaaS): AI is making it easier for less-skilled hackers to launch sophisticated ransomware attacks, targeting SMBs with fewer resources to defend themselves.
AI Manipulation of IoT Devices: Many small businesses use internet of things (IoT) devices, such as smart cameras or thermostats. AI-powered malware can exploit vulnerabilities in these devices to gain unauthorized access to networks.

We recently read a great, but chilling article from Malwarebytes titled: How to recognize AI-generated phishing emails. It’s worth a read to learn more about what to look for and what to do.

How Small Businesses Can Safeguard Their Data

Protecting your business from AI-driven cyber threats doesn’t require a Fortune 500 budget. Here are practical steps small businesses can take can take:

Adopt Strong Access Controls: Limit data access to only those employees who need it.
Regularly Update Software and Apps: Keep all antivirus software and systems patched to close security gaps.
Train Employees: Educate your team on identifying phishing attempts and following data security best practices.
Invest in Encryption: Encrypt sensitive customer and business data.
Create a Response Plan: Develop a clear strategy for responding to data breaches.
Partner with Experts: Work with managed security providers to implement AI-driven cybersecurity solutions tailored to small businesses.
Multi-Factor Authentication and Strong Passwords. These are tried-and-true tools that still help today.

The Road Ahead: Data Security in Small Businesses is Under Attack

AI is here to stay, and its role in business will only grow. By understanding its risks and benefits, small businesses can harness its potential while safeguarding their most valuable asset: data. Investing in AI-driven cybersecurity solutions, educating employees and partnering with trusted experts will go a long way in keeping your business secure.

As technology evolves, staying proactive about data security is not just smart—it’s essential. Don’t let your business fall behind. Take action now to protect your company’s future.

If your business is larger, read our recent article on the impacts of AI on medium-sized small businesses.

Protect Yourself from Tax-Related Identity Theft Before it is Too Late

Article updated January 13, 2025

This article was originally published in 2018, and sadly, the issues we faced then are still prevalent today. What has changed is the onslaught of technology fueled by artificial intelligence (AI) and machine learning (ML). Now, the bad guys have weapons that most of us couldn’t have imagined even two or three years ago. Our hope is to make readers more aware of tax-related identity theft and tax fraud scams that can steal their most treasured information during tax season.

It’s that time again for taxpayers’ annual trip to the financial dentist: tax time. Whether you do your taxes yourself or pay a service, it’s a great feeling to send off your return with a refund in the works.

Until…

You receive a letter from the Internal Revenue Service (IRS) politely telling you that your tax refund has already been processed. You’ve become the newest member of the tax-related identity theft club. Millions of hardworking Americans who file taxes fall victim to this growing problem every year.

Let’s dig into what you can do and what to look for to protect your information.

What Steps Can I Take to Prevent Tax-Related Identity Theft?

Tax-related identity theft occurs when someone uses your stolen Social Security number (SSN) to file a fraudulent tax return under your name.

If you’re lucky, you’ll receive a letter from the IRS telling you it suspects a fraudulent tax return has been filed under your name. Otherwise, you’ll find out once you’ve filed. Either way, you have some annoying and potentially time-consuming work ahead to clear up the problem. By the way, remember that the ONLY way you will hear from the IRS about these issues is by letter. The IRS will never call or email you.

Here’s the good news: You will eventually get the refund due to you from the IRS and/or your state.

The most effective way to lower your risk for tax-related identity theft is to file early. If you don’t, the thieves will. For them, the earlier they file, the earlier they get your refund in their hands.

Here are seven steps to help you clear up the problem and safeguard your refund:

Step #1: Report Tax-Related Identity Theft Immediately

Start by visiting the IRS identity theft website: identitytheft.gov. You can also call the IRS Identity Protection Specialized Unit at 1-800-908-4490. You’ll need to complete an identity theft affidavit (IRS Form 14039) so the IRS can place an alert on your account.

Don’t forget to contact your state revenue or taxing agency. Tax-related identity theft can get a big head-start with your SSN. Also, report the theft to your local police department to create an official theft report, which some government agencies and credit bureaus may require.

Notify your personal financial institutions such as banks and credit card companies to further protect your accounts.

Step #2: Compile Your Evidence

Gather these documents to support your case:

Copies of your tax returns from the past two to three years.
Driver’s license, birth certificate and passport.
Recent utility bills.
Marriage certificate (if applicable).
Police report.

This information helps the IRS verify your legitimate tax return and flag fraudulent activity.

Step #3: Protect Yourself for the Future

The IRS will issue you a personal identification number (PIN) to provide an additional layer of security. Use this PIN along with your SSN when filing future tax forms. You’ll receive a new PIN every year.

Keep your electronic devices secure:

Ignore unknown phone numbers that could harbor malware.
Carefully review and disable unnecessary applications.
Attach an email address to fraud alerts for updates.

Additionally, avoid carrying your Social Security card or documents containing your SSN. Protect your devices with anti-spam and anti-virus software and change passwords regularly.

Beware of phishing scams. The IRS will never call, email or text to demand immediate payment. Report such incidents to local law enforcement.

Step #4: Contact the Credit Bureaus

Place a fraud alert on your credit records by contacting one of the three major credit bureaus:

Equifax: www.Equifax.com, 800-525-6285
Experian: www.Experian.com, 888-397-3742
TransUnion: www.TransUnion.com, 800-680-7289

Fraud alerts last 90 days but can be renewed. They warn potential creditors that you’re a victim of identity theft and require them to verify your identity before issuing credit. Consider placing a credit freeze for added protection.

Step #5: Check Your Credit Reports

You’re entitled to a free annual credit report from each agency. Regularly check these reports for tax-related identity theft and unauthorized activity, such as new accounts or inaccuracies. Report any errors to your bank, the credit agency, and the business reporting incorrect information.

Step #6: Change ALL Your Passwords

Identity thieves exploit data breaches to access multiple accounts. Use unique, strong passwords for tax preparation and your bank accounts. Avoid reusing passwords across different platforms. Change compromised passwords immediately.

Step #7: Be Patient

Resolving tax-related identity theft can take up to 180 days. Once the IRS flags your return as fraudulent, future returns will be manually reviewed, potentially delaying refunds. However, rest assured, the IRS will eventually pay your refund.

How Are New Technologies Impacting Identity Theft?

AI and machine learning have significantly increased the sophistication of scams. Here are some new methods:

Text Message Scams: Scammers mimic reputable organizations like the IRS to request personal information. Never click on unsolicited links.
Social Media Scams: Fraudsters create fake profiles to steal personal information. Be cautious about accepting requests from unknown accounts for your tax records.
Cryptocurrency Scams: Loose regulations enable scammers to lure victims into fake investments and phishing schemes.
Vishing (Voice Phishing): Scammers use fake calls to impersonate organizations, including the IRS, to extract sensitive details. Initiate contact yourself to verify legitimacy. Phishing emails also remain a problem
Deep Fake Scams: AI-generated content can impersonate individuals or agencies to manipulate victims into providing information.

Final Thoughts

Tax-related identity theft remains a persistent issue. By staying vigilant, filing early and leveraging security measures, you can minimize risks to your important tax information. Protect your personal information year-round and remain informed about evolving threats. And, don’t be shy about looking for help from tax professionals.

Take action today to safeguard your identity and your tax refund.