IRS: No taxes on credit monitoring after breach

The IRS made it clear Thursday that it wouldn't count free credit monitoring offered to victims of data breaches as taxable income.

In a new notice, the tax agency said its current rules didn't specifically tackle that question. 

ADVERTISEMENT

Data breaches and identity theft have become an increasingly big problem for both the government and the private sector, with the IRS announcing in May that thieves had swiped data from around 100,000 tax accounts.

Businesses and government agencies have offered data breach victims free credit monitoring and other protections to help soften the blow. 

Now, the IRS says employers that offer that service don't have to include the value of the credit monitoring and other protections in an employee's tax forms. 

Identity protection services offered for reasons other than a data breach — including in an employee's compensation package — are not covered by the IRS's Thursday announcement.