By David Rae
It could be a terrible year for victims of tax fraud. That’s because reporting and correcting fraud will likely be more onerous. If you’ve ever been victimized, you know what a pain in the booty, and wallet, it is. With the IRS playing catch up after Trump Shutdown, it would seem that scammers have plenty of opportunities to run rampant.
In December 2018, before the Trump shutdown, the IRS issued an alert for employers about the potential for tax scams and identity theft. Just like individuals, businesses can have their identities stolen. Tax refunds may disappear and the Social Security numbers of employees may be stolen.
The Internet has made it easier than ever for criminals to access the personal information of users. With that data, they can steal your identity, ruin your credit, financial security, not to mention your peace of mind.
Follow the six steps below to reduce your risk of becoming a victim of costly and time-consuming scams. A little bit of proactive vigilance now can mean you won’t have a tax-related scam nightmare later.
Tax refund theft is more common than you might think
You may be wondering what the heck is tax refund theft? The short answer is that it occurs when a tax scammer obtains your personal information. A tax return is then filed in your name, or someone else’s, typically claiming a large, but bogus, tax refund. That tax refund is then routed to an address that is not yours. The fraudsters will receive the money whether or not you were actually owed a refund.
If you think filing your taxes is miserable, wait until you go to file and then realize you have been a victim of tax identity theft. You likely won’t know you’re a victim until you go to file your taxes and the IRS rejects your (duplicate) return. I bet many of you look forward to receiving large tax refunds to pay your bills.
6 Tips to Protect Yourself from Identity Theft
1. Be Organized and File Early
The earlier you file your taxes, the sooner you will get any refunds owed. Doing so will also make it much more difficult for tax scammers to beat you to the punch. Once you’ve received your tax refund, it will be much more difficult for criminals to steal, at least via the IRS.
2. Get a Lower Tax Refund by Adjusting Your Withholdings
Just to be clear, income taxes are based on your earned income. How much you owe, or have refunded, at tax time will depend on the amount you elected to have withheld from your paychecks. The typical refund averages around $3,100, per household, each year. (They are estimated to be much lower for 2018). Of course, some of you will get back much more while others will get less. That is a lot of money to loan the government for nearly a year. Having a little less money taken out of your paycheck each month can hopefully reduce some of your financial stress, give you a little extra money to save for a rainy day or take that trip you’ve been dreaming of.
3. Be Diligent with Your Passwords
Yes, remembering all those passwords is a big pain. But, don’t try to make it easier on yourself by using the same password for multiple websites. I’m talking to you Mr. Password and Ms. Password123! Try to use long phrases that will make it hard for a hacker to break. Your name, birthday or even those of your kids are not great passwords either. Consider mixing up letters, numbers, upper and lower case letters and symbols.
4. Update Your Cybersecurity Regularly
It may feel like you are constantly updating your software, but you are probably not doing it enough. My computer guy just told me my computer was a mess. That was a day after I thought I had updated everything.
At the same time, be cautious when and where you post personal information. Be aware of things like place of birth, date of birth and pets’ names on sites that can be viewed by anyone. Obviously, don’t reference your Social Securitynumber on Facebook.
Invest in a shredder, and shred all paperwork that contains your personal information. Don’t login into bank or investment accounts on unsecured Wi-Fi networks. Do not prepare and file your tax returns on a public computer. Lastly, back up your computer on a regular basis, ideally to the cloud or another backup that is kept offsite.
5. The IRS will Not just Call You
If you are like many others who rarely answer the phone when you know who is calling, why would you answer the call from an unidentified number? Remember, the Internal Revenue Service (IRS) will not call you out of the blue. Likewise, IRS employees will not email you. If someone calls and claims to be from the IRS, HANG UP! It will most likely be a scammer.
Additionally, don’t click on links within emails that claim to be from the IRS as it is probably a phishing scam. Likewise, don’t click on links from your tax preparer without verifying that the email is actually from your tax person. Tax preparers are favorite targets of identity thieves as well.
If you receive a call and are uncertain if the caller is an IRS employee, ask for a name and callback number for verification.
Wow! I just received a phishing scam email as I’m writing this post. The scammers are trying to get my Apple ID. While that isn’t tax related, I wanted to share it with you to highlight the prevalence of online fraud attempts.
6. If you think you are the victim of Tax Fraud Report It ASAP
If you think you may be a victim of tax fraud or scam, the IRS has laid out all the steps to tax on its official site, IRS.GOV. There are additional agencies that should be notified as well. That includes your state tax authority. If scammers have your information and have filed a fraudulent federal tax return, they will also likely file a fraudulent state return.
Cleaning up these tax disasters can easily take 180 days to resolve, not to mention hours and hours of calls and conversations with the IRS. The 180-day estimate assumes the IRS is at full staffing levels. It could be much longer this year. Tax fraud is complicated and stressful to clear up. If you become the victim of one of these scams, consider obtaining professional guidance from a certified public accountant (CPA) or enrolled agent (EA) to help clear up the issue.