Avoid Becoming A Victim Of Tax-Related ID Theft

Identity thieves are hard at work year round, but they’re especially active during tax season. Take preventative measures at tax time to minimize risk.

According to the Federal Trade Commission, the most prevalent identity theft cases came from government documents or benefits fraud. More than 395,000 people reported that someone submitted a fraudulent government document under their name, including tax-related forms.

Tax-related identity fraud generally occurs in one of two ways. The fraudster will either use a person’s Social Security number for employment purposes and get a tax return that way, or simply obtain enough information to file a tax return as a different person. Victims will become aware of the theft when their tax return is rejected by the IRS or they receive a letter stating not all income was declared. Choices you make at tax time can help reduce your risk of becoming a victim.

Take Preventative Measures

File Early

It’s best to file as soon as you receive all tax-related documents. This means any other attempt to file a return will be rejected as a duplicate. If someone submits a fraudulent return before you, you’re expected to mail your tax return to the IRS with Form 14039 attached. You may request a copy of the fraudulent return, but processing your return will likely be delayed.

Use Caution With Tax Return Preparers

No matter how you file, it’s important to use a reputable source and exercise extreme caution. ‘Ghost’ tax return preparers leave no trace of who they are when assisting taxpayers with returns, may claim phony deductions to boost refunds, and could direct refunds to their own account. By law, tax preparers are required to have a valid Preparer Tax Identification Number (PTIN) and must sign tax returns as a paid preparer.

Stay Informed

Taxpayers should note the IRS will never contact you by email, text, or social media. They’ll only mail notices for overdue tax bills and never require an immediate payment over the phone. IRS impersonators may try to intimidate you with threats, such as suspending your SSN or driver license to get you to wire money or mail gift cards. Read our Beware Of Tax Time Scams article and review the IRS’ Consumer Alerts to learn more.

Create An IP PIN

Taxpayers now have the option to create an IRS Identity Protection PIN (IP PIN). It’s intended to thwart the filing of fraudulent returns by adding an extra layer of security. To be eligible, you must be a confirmed victim of identity theft or reside in one of 20 states, including Texas. If you opt-in, you’ll be mailed a new IP PIN annually and need to include it on your tax return, otherwise your return will be rejected.

Consider E-filing

If eligible, there are many advantages to e-filing. For one, you can receive a refund within three weeks if you elect direct deposit. This is significantly less than the six to eight weeks it takes to process mailed returns. Additionally, you’ll receive immediate confirmation upon submission, you’ll be notified if your return is rejected, and your information will be sent securely. See if you’re eligible for the IRS Free File or save with a discount.

Act Quickly If You’re A Victim

Recommendations from the IRS include filing a complaint with the Federal Trade Commission, filing a paper return with an affidavit attached, placing a fraud alert with at least one of the credit bureaus, notifying the IRS, and closing fraudulent accounts you may have discovered.

To obtain your credit report at no cost, visit annualcreditreport.com. Obtaining your report will not harm your credit score and will give you an opportunity to ensure accurate reporting.