You’ve learned you’re entitled to a tax refund. Could there be more joyous tax news? Unfortunately, if tax identity thieves have their way, you may never see that refund.
In fact, Time magazine reports it’s estimated that more than 1 million U.S. taxpayers have their refunds stolen each year. Time further reports that National Taxpayer Advocate Nina E. Olson told Congress tax-related identity theft cases have increased 650 percent since 2008.
So, how do they do it? Oftentimes, identity thieves use your Social Security number to file a false return, claiming a refund. Then, when you file your real return, the IRS rejects it – thinking you already filed. In other cases, scammers pretend to be legitimate tax preparers doing business online. They use fake websites to collect and steal your refund and/or personal information.
To protect yourself, take these steps to guard your personal information and prevent tax identity theft from happening to you.
1. Guard your SSN. Don’t carry your Society Security card or any other documents that have your Social Security number or Individual Taxpayer Identification Number (ITIN).
2. Know whom you’re dealing with. The IRS and other legitimate enterprises won’t email you or contact you via social networks asking for personal data. Don’t give out info like your Social Security number unless you’re certain you know whom you’re dealing with.
3. Password-protect your financial information.
- Make sure tax and other financial software on your computer is password-protected
- Change your passwords for these programs and banking or investing websites often – and never write down or share the passwords
- Don’t forget to use firewalls and anti-virus software and to update security patches as recommended
- If you send financial data to your accountant or receive your returns via email, make sure documents are password-protected
4. Research your tax preparer. Danger looms online, so be sure you know your tax preparer is a real person – and one you can trust.
5. Shred away. If you have tax or other financial documents at home that you’re ready to dispose of, don’t just throw them in the trash. Anything with your personal information, including your SSN, should be shredded. If you don’t own a shredder, some business supply stores offer this service for a fee. Your local credit union may also provide free shred days for members.
6. File early. Want to beat tax identity thieves to the punch? Don’t procrastinate filing your return.
7. Monitor your personal data. Start by getting your free annual credit report and looking to see if anyone has opened an account in your name. This can be a sign that a thief is up to no good with your data. You can also order a tax return transcript from the IRS and compare it against your own tax records.
How the IRS is helping
The IRS is upping its efforts to go after thieves and help victims of identity theft. Here are a few things the IRS is doing:
- IP PINs. The IRS is increasing the number of Identity Protection Personal Identification Numbers (IP PINs) it issues to victims of identity theft. This unique identifier proves that a taxpayer is the rightful filer.
- Resolving cases. More and more IRS employees are being dedicated to resolving cases of identify theft. The IRS notes that a typical case can take about 180 days to resolve, but they’re striving to reduce that.
- Service options. You can visit irs.gov to learn more about tax identity theft issues, and you can call the IRS Identity Protection Specialized Unit at 800-908-4490.
For more information on protecting your identity, see “ID theft: simple steps can help protect your data” and “Combating ID Theft: Advanced tips and tools for protecting your identity.” If you suspect someone has stolen your identity, it’s time to act to prevent further damage. Download our Essential ID Theft Checklist to see what your next steps are.