File Your Income Taxes Early… Before Someone Else Does It For You

Spring is just around the corner and so is the deadline for filing your 2017 income taxes.

For those of us who haven’t filed our tax return already, this somewhat daunting, annual task is beginning to weigh more heavily on our minds. Many of us are concerned about filing our return correctly, what kind of tax refund or, in some cases, payment we can expect and whether we should do it on our own with an online service or hire an accountant.

But, as we procrastinators begin getting our tax documents together, there’s something else we should keep in mind: tax return fraud.

The IRS launched 1,117 general tax fraud investigations for the fiscal year of 2016. Although this was a decrease from the two prior years, according to IRS, it doesn’t appear that tax scams are ever going away. Unfortunately, with every measure taken by the IRS to prevent this, the schemers/scammers find ways to circumvent it.

Identity theft related tax fraud occurs when an identity thief somehow obtains your name and social security number and uses it to file a fraudulent tax return in your name. This is accomplished in many ways to include phishing emails, snooping through your trash for intact documents containing personal information, hacking into a site/entity that has your personal information, stealing or finding your wallet/purse and public WiFi monitoring.

Once the identity thief has your personal information, they can use this to file fraudulent tax returns with the IRS in order to receive credits or refunds. In most cases, these thieves have the funds distributed via a pre-loaded debit card or direct deposit. This helps them avoid the security measures relating to cashing a paper check.

When this happens, the tax return you file comes under suspicion because it is the second return filed for the same taxpayer. Unfortunately, the burden of proof now lies on you. You will need to send the IRS a Form 14039 (IRS Identity Theft Affidavit). This can be a lengthy process.  If you’re expecting a refund it will not be processed until the IRS confirms your identity, as the actual taxpayer. If you owe taxes, you can be left with resulting collection actions, audits and even aggressive tax collection through the IRS appeals process.

It can become ugly.

But, like many situations in life, an ounce of prevention is worth a pound of cure. Here are several ways to minimize your risk of falling prey to these sinister scams:

  • File Early (okay, this advice is a little late for those of us who haven’t already filed. But, let’s make sure to keep this in mind next year.)

Filing early lowers the chance of someone doing it before you. This turns the tables on the identity thief, as your return will be accepted by the IRS first and their fraudulent return in your name will be denied.

  • Clear Your Email Inbox and Invest in a Shredder

Most identity theft occurs via the trash. All identity thieves need to file a false return is your legal name, date of birth and social security number.  Think of the people you may have mailed or emailed pieces of this information…a W-9 for an employer, a scanned copy of your passport to a travel agency or a completed form to your healthcare provider.

Don’t keep this information in your email in/sent box. In addition, shred any physical/hardcopy documents containing this information.

  • The IRS Will Never Call You…So, Hang Up

Scammers often call under the pretense they are the IRS and you owe money. They may sound totally legitimate, oftentimes giving you a fake badge number and even sharing knowledge that leads you to believe they really know you.

Hang up! The IRS will never call or email you. The IRS only communicates by physical (snail) mail.

  • If Your Credit Card Company or Bank Contacts You, Call Them Back on an Official Number

Identity thieves may pose as representatives from your bank or credit card company. These scammers may be trickier to catch because these types of organizations do sometimes call.

Don’t give out any personal information with inbound requests. Call the organization back using their official customer service number.

  • Don’t Sign a Blank Return 

If a friend asks you to sign a blank return and they will take care of doing your taxes…don’t do it. Sometimes scammers are found in the least expected place…your inner social circle.

  • Beware of Tax Pop-Up Shops

When hiring anyone to do your taxes, especially those “once a year” tax preparation shops, do your homework and make sure they are legitimate.

Although special attention is being given to identity fraud risks during tax season in this article, this should be a year-round concern. Monitoring your credit on a regular basis yourself or through a monitoring service is the best practice to reduce your risk of becoming the victim of an identity thief.

Comments are closed.