Protect Yourself from Tax Identity Theft

As we transition into the New Year, another tax season is upon us. But what happens if your tax refund is in the hands of a thief? Here’s what you need to know to protect yourself from identity fraud.

What is Tax Identity Theft?

Tax identity theft occurs when someone uses your personal information to file a fraudulent tax return and steal your refund. In 2023, the IRS identified over 1 million tax returns as potentially fraudulent, totaling an estimated $6.3 billion in refunds (CNBC). Victims may face delays up to 19 months after filing.

How Does Tax Identity Theft Happen?

Scammers can steal and acquire your sensitive information through Phishing. Phishing is a cybercrime that involves a scammer pretending to be another person or entity, to trick you into giving them sensitive information. These scams are mainly carried out via email but can also be done through phone calls and text. The tone of these messages can vary. Some can be demanding when it pertains to requesting information, and others can appear friendly, hoping to lower your guard. If successful, the fraudsters won’t waste any time. Then when you file your return, the IRS will have flag it because a return using your information has already been processed.

What to do if you’re the victim of Tax Fraud?

Your first step is to call the IRS and let them know about your issue. They will then direct you to complete IRS Form 14039, a document where you will report the identity theft. After submitting Form 14039, you may report fraud on IdentityTheft.gov and contact your local police department if you’ve noticed any unauthorized purchases or new accounts being opened. You should also consider placing a credit freeze with all three credit bureaus to prevent new lines of credit from being opened in your name. After taking these measures, continue to monitor your accounts and maintain communication with the IRS.

How Can You Prevent Tax Fraud from Happening?

To protect yourself from tax identity theft, good cybersecurity practices can go a long way. Using tools like Dual Factor Authentication, unique (and strong) passwords, and being aware of suspicious emails will help keep your information safe. These practices are crucial, as they are the first lines of defense. When it comes to fraudulent tax filings, you might also consider these methods. Filing early is a simple, yet effective way of protecting your tax return. By submitting it early, you greatly reduce the risk of scammers filing in your name first. One might also consider creating a tax filing pin. A tax filing pin is a 6-digit number that provides additional protection against identity theft. The IRS will assign you a pin, and you must enter it to file your tax return. If you end up losing your pin, you can contact the number on their website for a new pin.

By taking proactive steps and staying vigilant, you can protect your information this, and every tax season.

The information provided herein is for educational purposes only, and should not be construed as advice, including, but not limited to tax, legal, insurance, investment, or retirement advice. For your specific planning needs, please seek the advice of Integris Wealth Management, your tax accountant, attorney, insurance agent, or other professional as appropriate. Investing involves the risk of loss.