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Identity theft is always a concern but during tax season, identity thieves seem to work harder than ever. They take advantage of the personal information in your mailbox and even trick countless people into giving them sensitive information by posing as IRS agents on the phone or via email. Tax-related identity theft is a serious problem, but there are things you can do to protect yourself.
What is Tax-Related Identity Theft?
Tax-related identity theft occurs when someone uses your name and social security number to file a fraudulent tax return in order to get a tax refund they’re not entitled to. All a scammer needs to do this is your name and social security number.
Unfortunately, you may not realize your identity has been stolen until you file a tax return and learn that someone has already filed a return with your social security number. That’s the most common way people find out their identity has been stolen.
Here are a few tell-tale signs you may be a victim of tax identity theft:
- More than one tax return in one year has been filed for your social security number
- You owe additional taxes or have had collection actions taken against you for a year you did not file a tax return
- IRS records show income for an employer you have never worked for
If you experience any of these, report the incident to the FTC’s identity theft site. You should also contact a credit bureau to file a fraud alert on your credit report and close any accounts that were compromised or created without your permission and fill out and submit IRS form 14039, the Identity Theft Affidavit.
Things to Keep in Mind Regarding Tax-Related Identity Theft
Tax-related identity theft is scary but there are several precautions you can take to lower your chances of becoming a victim. There are also important things to remember that will protect your information from scammers during tax season - and the rest of the year.
- Know that the IRS will only contact you through the United States Postal Service. The IRS does not call taxpayers or contact them via electronic methods (email, text, social media.) Never give out personal information to anyone claiming to be an IRS agent over the phone or via email.
- Data breaches don’t always open you up to identity theft-related tax fraud. Data breaches and hacks are scary and unfortunately they’re becoming more common. While a breach can certainly lead to identity theft and tax fraud, that’s not always the case. To commit identity theft-related tax fraud, scammers need specific information. Before panicking, contact the company that was breached to find out what information was stolen.
- Filing your taxes early doesn’t necessarily prevent identity theft. The IRS has long recommended filing early to avoid having someone file a fraudulent return with your information. Unfortunately, this only helps you avoid tax-related identity theft. If your information has been compromised in a data breach, scammers may still have your information, they just won’t be able to file a tax return with it. Contact the company responsible for the breach to learn exactly what information was stolen and what your next steps should be.
- Take precaution when filing online. It’s convenient to file your taxes online, as long as you’ve taken measures to protect yourself. Always use strong passwords and change your password often. You should also update your firewall, antivirus, and anti-spyware software before starting your online tax return.
- An IP PIN isn’t the answer to your identity theft worries. The IRS has started issuing an IP PIN (identity protection personal identification number) to taxpayers who have experienced tax-related identity theft or live in certain states with a high percentage of the country’s tax-related identity theft cases. This is an extra layer of security for these taxpayers but it’s important to know that they’re not available for everyone and you cannot voluntarily create an IP PIN at this time. The IRS must invite you to create one based on the criteria previously mentioned.
- Make sure your mailbox is secure. With sensitive end-of-year financial documents being mailed to you, making sure your mailbox is secure is your first line of defense against fraudsters. You can secure your mailbox by putting a lock on it or asking that your tax documents be mailed elsewhere, like to your office or work.
- Store your tax documents securely and dispose of them safely. Never put financial documents in the recycling bin. Use a shredder when possible, or rip the documents, being sure to separate all pieces of identifying information. Documents (including your social security card) should be stored somewhere safe, like a locking file cabinet.
Have An Experienced Raleigh CPA on Your Side
Get peace of mind this tax season with a diligent, experienced CPA. We take extra precaution to protect our clients’ information, providing an additional layer of security in the fight against identity theft. To minimize your risk of identity theft and maximize your refund, submit our online contact form or call our Raleigh accounting firm today at 919-420-0092.