How to Prevent Identity Theft During the Tax Season

Tax Identity theft is one of the fastest-growing crimes in the country. It is also among the hardest to find until the harm has already been done and it is too late. The IRS identified over 1 million potentially fraudulent tax returns in 2023, demonstrating the ongoing battle against tax-related identity theft that steals millions of dollars from taxpayers each year.

Tax season is stressful enough without the added worry of identity theft. Unfortunately, identity thieves seem to work harder than ever as they see this period as a prime opportunity to steal personal information and file fraudulent tax returns, leaving you with a hefty bill and a stolen refund. The time and effort required to restore your identity and repair damaged credit is reason enough to take action towards preventing such a frustrating crime. This article equips you with the knowledge and tools to navigate tax season with confidence and safeguard your identity.

What is Tax Identity theft?

Tax identity theft is when someone uses your Social Security number data to pose as you or steal from your tax refund or for work. People often discover that they've been a victim of tax identity theft later when they file their tax returns. 

Why Tax Season is Prime Time for Identity Thieves

Who else loves tax season besides accountants? Scammers. It’s high time of year for online risks here in the U.S. with the onset of tax season, where scammers unleash all manner of scams aimed at taxpayers.

Tax returns are packed with sensitive information like your Social Security number, income details, and bank account numbers, making them highly valuable to identity thieves. With increased filing activity and potential confusion around tax laws, criminals exploit vulnerabilities and target unsuspecting individuals.

Three types of Tax Identity Theft

Refund Theft: Thieves file a fraudulent return using your stolen information to claim your refund. 

Earned Income Credit Theft: Criminals file a return claiming fake wages and the Earned Income Credit, leaving you with a tax liability. 

Filing a Duplicate Return: Thieves file a return using your information before you do, blocking your legitimate filing and delaying your refund.

The Financial and Emotional Impact of Identity Theft

Tax identity theft can have devastating consequences. You might face financial losses from stolen refunds, tax penalties, and credit damage. The emotional toll can be significant, causing stress, anxiety, and frustration.

Here are some warning signs that could indicate a fraudulent tax return:

• You get a letter from the IRS about a suspicious tax return, and you haven't filed one yet.
• Your e-filed tax return is rejected because of a duplicate Social Security number.
• You get a tax transcript in the mail that you didn't request.
• You get a notice from the IRS that an online account has been created in your name or your existing account has been accessed or disabled, and you haven't taken these actions.
• You get a notice from the IRS that you owe additional tax, your refund is offset or collection actions are taken against you regarding a tax year for which you didn't file.
• IRS records show you received income from an employer you don't recognize and for whom you didn't work.
• If someone uses your information to file a fraudulent tax return, your own return will be rejected as a duplicate. If you're expecting a refund, it could be delayed while you sort out the situation with the IRS. That said, you don't have to worry about missing out on the refund altogether.

Don't underestimate the danger of tax identity theft. It's like an opened door, potentially leading to mountains of debt, damaged credit, and even insurance fraud. Nobody wants to deal with the stress and hardship of identity theft. Protect yourself and your loved ones by staying vigilant and securing your personal information. Here's how!

How to protect yourself from identity theft

While identity theft happens to millions of people every year, it’s possible to reduce the chances of becoming a victim. Knowledge is power! Taking steps to protect your personal information can help you avoid tax identity theft. Here’s what you can do to stay ahead of identity thieves.

• Do not carry identification with your SSN on it.
• If someone wants your SSN, always ask why because it is not always required.
• Keep personal and confidential information in a secure place.
• Take extra precautions when discarding personal or confidential information.
• Protect personal computers, smartphones, and other devices by using anti-virus software.
• Do not click on unexpected links, images or attachments in emails. Check links before clicking by hovering over the link and look at the bottom left corner of the browser to verify the exact URL.
• Use strong passwords and never share your passwords. Along with changing your passwords at least every 90 days.
• Never give personal information through unencrypted email, social media, or text messaging.
• Check your credit report annually.
• Monitor and examine your bank and Social Security Administration statements.
• You can also utilize a Reverse SSN Search to check if Someone is Using Your SSN

If you suspect identity theft, contact the IRS, the Federal Trade Commission, and your financial institutions immediately. 

• Government Agencies and Non-profit Organizations for Identity Theft Support:
• Internal Revenue Service (IRS): https://www.irs.gov/identity-theft-central
• Federal Trade Commission (FTC): https://www.identitytheft.gov/
• National Consumer Law Center: https://www.nclc.org/
• Reporting Identity Theft and Reclaiming Your Finances:
• File a complaint with the FTC at IdentityTheft.gov.
• Report the theft to the IRS using Form 14039, Identity Theft Affidavit.
• Contact your financial institutions to freeze your accounts and dispute fraudulent activity.

Close the accounts that you know or believe have been tampered with or opened fraudulently Fraud alerts and security freeze can be placed on a credit report through one of the three consumer reporting companies: (This way, you will be notified if someone tries to open an account in your name.)

TransUnion: 800-680-7289; www.transunion.com  

Equifax: 800-525-6285; www.equifax.com  

Experian: (888) EXPERIAN (397-3742); www.experian.com

Be mindful of social media sharing and avoid posting personal information online. Use a firewall and antivirus software on your computer and mobile devices. Stay informed about the latest tax scams and identity theft trends. Ignoring the risk is the biggest mistake. By taking action, you become the protector, not the potential victim.

Tax season is stressful, but there are steps that you can utilize to significantly reduce your risk of becoming a victim of tax identity theft. Remember, protecting your personal information is an ongoing process, and vigilance is key. With the right knowledge and proactive measures, you can file your taxes with confidence and peace of mind.