Nobody wants to become the victim of identity theft. As the COVID-19 pandemic persists, and economic strain begins to affect more and more people, the risk becomes even greater. In particular, tax identity fraud is a big concern. After all, with one stimulus check already sent out, and perhaps another on the way, your taxes are playing an even bigger role than usual in your life right now. Here is all that you need to know about preventing tax identity fraud.
What Is Tax Identity Fraud?
Arming yourself with knowledge is the best thing that you can do to avoid becoming the victim of any scam. Therefore, it’s important to learn as much as you can about tax identity fraud. This is a form of identity theft specifically linked to your taxes. Typically, someone steals your tax ID information then uses it to file taxes, redirecting the tax refund directly to their own accounts.
Even if you owe money to the government, they can still utilize key information, such as your social security number. Then they make up fake forms, report fake income, and request the tax refund.
Many people have delayed doing their taxes this year because the government offered an extension due to COVID-19. Therefore, fraudsters have more time this year than usual to take advantage of your account. Additionally, stimulus checks are going out to the same addresses where people have their tax refunds directly deposited. Therefore, fraudsters have even more incentive to attempt tax identity fraud.
How to Prevent Tax Identity Fraud
Anyone can become a victim of identity theft, including tax identity fraud. The fact is that we put a lot of personal information out there into the world. We have to in order to run our daily financial lives. As a result, that information can be at risk. However, there are actions that you can take to limit the likelihood of becoming a victim of tax identity fraud.
Protect Your Personal and Financial Information
You can take action to protect your personal information. Here are some of the things that you can do:
- Limit how often you give out your social security number. This is the number one piece of identifying information that a scammer needs to commit tax identity fraud. Oftentimes, when asked for a social security number, you don’t actually have to provide it. Ask the person requesting it (such as a credit card customer service representative) if there is another form of personal identification that they will accept instead.
- Generally speaking, don’t give out personal financial information. More specifically, if you receive an unsolicited request for this information (via email, text, or over the phone), be careful. Chances are that this is a fraudulent attempt. Note that email messages and letters sent through the mail often look very official. However, if you didn’t request the activity, and they’ve contacted you first, be wary.
- Use smart computer hygiene to protect your information. Install antivirus software. Use personal firewalls on your computer. Use encryption programs. Don’t save personal information so that your computer automatically enters it for you; enter it manually each time. Change all passwords frequently.
Additional Password Tips
We use passwords online for many different accounts. Make sure that you always use different passwords, choosing particularly challenging passwords for financial accounts that contain your personal identifying information. Here are some additional password tips:
- Use a different password on every single account.
- Make it a long password that doesn’t include real words.
- Use two-factor / multi-factor authorization for passwords on any site that offers it.
- Change your passwords regularly on every account. You can use a password manager to help you with this.
- If you can create a User ID that differs from your email address, do so.
Monitor For Identity Tax Fraud
You can also prevent identity tax fraud, or at the very least nip it in the bud, by knowing what signs to look for. Monitor all of your accounts very carefully. In particular, make sure that you:
- Regularly review your credit report. Go through it with a fine-tooth comb. Anything that doesn’t look right should be disputed. If you see accounts that you aren’t familiar with, contact the credit reporting bureau immediately to report potential fraud.
- Always review your Social security statement. You get one each year. Do you ever look at it closely? You should. The most important thing to look for is whether or not the earnings are correct. People who steal your identity may use it to obtain employment. Their earnings then show up under your social security number. This means that they have access to your social security number, putting you at risk of tax identity fraud.
- Read notices that come from the IRS. You need to be careful because scammers can create mail that looks very real. That said, if your account has potentially been compromised, the IRS will send you an official notice. Therefore, carefully review any mail that comes. Contact the IRS directly to respond. Double-check the phone number to call online to make sure that it matches what the mail says.
Additional Tips to Prevent Tax Identity Fraud
Generally speaking, you should try to file your taxes as early as possible each year. Even though the government extended the filing deadline this year, savvy consumers still filed early. Fraudsters have to file before you do if they want the return to come to them. Therefore, they take action very early in the year. If you file as soon as you’re able to each year, you are less likely to become a victim of tax identity fraud. If you try to file and receive a notice that you can’t because of duplicate filing, chances are that tax identity fraud is the reason.
What To Do If You Become a Victim
As soon as you suspect that you might be a victim of tax identity fraud, take action. The IRS has a complete guide to tax-related identity theft that will tell you step-by-step what to do.