Identity Theft and Tax Fraud was a major issue last season. In fact, according to the IRS, 2.7 million taxpayers were affected by identity theft in 2015.
Tax identity theft or fraud occurs when someone uses your social security to file a tax return on your behalf and collect the refund. This issue is not new and it happens more than you would think. The best way to avoid it happening to you is to know how it happens so you can take the proper precautions. Here are the top ways fraudsters can steal your identity and claim that coveted tax return.
One of the most common scams in tax fraud is posing as the IRS via email or phone. Here’s how it happens: The fraudster calls or emails and indicates that they are from the IRS and need further information from you – or they say that you owe money. These scammers can be very crafty – altering the name that appears on your caller ID, creating fancy letterhead or email signatures. They can also be very threatening and have an urgency to their tone. The above tweet is from an actual employee of the IRS!
It is important to know that the IRS will never ask for credit card or debit card numbers over the phone, will never threaten to get the police involved, or demand that you pay taxes without giving you an opportunity to question or appeal the amount that you owe.
It is also important to know the official IRS website: IRS.gov. Not .org, .com, etc.
Protect your computers and accounts
Another way fraudsters can obtain information is by hacking into your accounts or your computer. Beyond filing your taxes and stealing your return, scammers can steal your identity, empty your bank accounts, or do other damage. This is why it is so important to protect your computer and accounts. A few tips:
- Always use security software with firewall and anti-virus protections
- Encrypt sensitive files such as tax records you store on your computer
- Use passwords of at least 10-12 characters, mixing letters, numbers, and special characters
- Don’t routinely carry your social security card with you in the event that your purse or wallet is stolen.
Don’t give out your social security number
Be very careful who you give your social security number out to. Scammers don’t just pose as the IRS, they pose as your bank, your credit card company, etc. Most places only ask that you verify the last 4 of your social – a much safer bet than giving your entire S.S.N out.
Choose Your Preparer Wisely
Believe it or not, you need to be careful about the tax preparers you choose. The IRS has caught several preparers filing false returns for clients to maximize refunds. Other preparers have been caught pocketing their client’s individual health coverage payments.
When choosing a tax preparer, check to make sure they are registered with the IRS and have a PTIN. You should also look into their credentials. While Virginia has no licensing for tax practitioners, there is an IRS program called the Annual Filing Season Program that tax preparers can elect to go through in order to gain a “Record of Completion”. This shows that they at least have a certain base level of tax knowledge. Other credentials to look for are CPA (Certified Public Accountant) and EA (Enrolled Agent). CPAs and EAs are able to represent their clients on behalf of the IRS. An EA is the highest designation a tax preparer can have in the eyes of the IRS.
In the event of tax related identity theft
The IRS has a process for reporting identity theft. Information can be found on their website here: How IRS ID Theft Victim Assistance Works.
As always, we are here for you! Give us a call or schedule an appointment online. If you’re looking for a good Identity Theft Protection service, here’s a great resource that reviews a number of them.