A tax identity theft scam is when someone steals your identity and uses it to file taxes. Many times, this fraudulent activity is used to steal your refund, but it can also be used to make the IRS believe you owe more taxes than you actually do.
Tax identity theft is a serious issue, and the IRS doesn’t take it lightly. In 2015, the IRS stopped $8 billion in fraudulent returns, and through new initiatives and efforts, they were able to protect over $20 billion in 2017. Though the number of victims drops each year, this crime continues to be a problem for taxpayers around the country. Here’s how you can avoid being the victim of a tax identity theft scam.
Don’t Fall for IRS Telephone Scams
IRS telephone scams were a big problem several years ago, but after a lot of media coverage, many taxpayers wised up and stopped falling for the scams. Unfortunately, last year, scammers developed a new tactic using spoofing, which is where a caller disguises their number to appear as if it is from somewhere else. Though the call might originate in India, the spoofed number could appear as though it’s coming from a legitimate IRS office.
If you get a call from the IRS, how do you know it’s a scam? The IRS prefers to mail information about your taxes, and in the rare circumstance they do call you, they will never ask for any personal identification information such as your social security number or credit card. If you’re not sure if a call is a scam, you can always hang up, research the number to the IRS, and then call that number and verify if/how they have contacted you.
Practice Safe Handling of Personally Identifiable Information
Personally identifiable information (PII) is anything that contains information about you such as your social security number or tax payer ID. This information should always be kept secure. Never leave home with this information unless it is absolutely necessary. Keep it in a sealed bag in a locked filing cabinet or fire-proof, locked safe. For all other PII, shred any documents you don’t need and consider filing paperwork in a password-protected cloud system.
Protect Your Computer and Online Accounts
Your computer, cell phone, and online accounts contain plenty of data about you that can be useful to thieves. Here are a few tips to make sure all of this information stays safe:
- Use smart passwords – Don’t write passwords down or make them easy to guess. Instead, use a password program to generate and store complex passwords. Change them every six months.
- Use virus and malware protection – Your computer needs malware and virus protection that is constantly updated. This will protect any files you store on your computer. Make sure every computer and laptop you use has these programs installed.
- Watch out for phishing scams – Thieves and hackers are clever, but you can be smarter. Never download email attachments or open links that aren’t from trusted sources. Even if an email looks like it’s from someone you know, always verify the email address before clicking any links or downloads.
- Use a secured connection when accessing financial information – Never check your bank account or financial records using public Wi-Fi. If you must use public Wi-Fi, make sure you use a VPN and enable your firewalls.
Use Reputable Tax Software or Professionals
It might be tempting to work with an accountant that a friend of a friend recommends because they are “aggressive,” but these professionals can get you in more trouble than it’s worth. It’s always better to go with a trusted professional. And if you’re filing your taxes online, always use a reputable company.
Filing early has a lot of benefits. Many people wait until the deadline, which means the IRS takes more time to process returns closer to the tax deadline. When you file early, you not only have a better chance of receiving your refund faster, but you also eliminate the ability for scammers to file because if you’ve already filed, they won’t be able to.
Place a Fraud Alert
If you think your personal information has been stolen, consider filing a fraud alert. For example, if you lost your wallet or you have reason to believe someone gained access to your personal information or accounts, then placing a fraud alert on your account can prevent criminal activity. Most fraud alerts only last for 90 days and require extra steps to verify your identity.
What to Do if You Believe You Are the Victim of Tax Identity Theft
If you receive a notice from the IRS about a suspicious return, or when you file your return you receive a message that your return has already been filed, then you need to call the IRS Identity Protection Unit right away at this number 800-908-4490. You should also consider filing a police report and adding an identity theft affidavit. Processing these claims will take time, but in the interim you should also consider freezing your credit, checking all your other personal accounts, and closely monitoring your credit statements and reports.