Falling prey to a tax-related fraud can cause multiple troubles while filing your returns. For one, it will make it difficult for you to receive tax refunds, and second, the IRS will think you owe taxes when you don’t. The worst part, you can never be 100% secure from tax-related identity theft, but you surely can take preventive measures to save yourself from the fraud, and everything that follows it.
The best way is to stay vigilant and keep an eye on signs of tax identity theft. This helps you track the discrepancy sooner and take corrective measures to prevent it. In this blog, we are going to throw light on some tactics that may help reduce the chances of such a fraud. Let’s take a look.
File your taxes early
Filing your returns early is the easiest way to avoid being duped by tax fraud. The longer you wait, the higher are the chances of tax fraud to steal your identity and claim your tax refunds. Hence, as soon as you have all the documents in your hand, you shall make it a point to thoroughly review them to ensure that they are correct and complete and file without any procrastination.
Place a tax freeze or fraud alert on your credit file
If by any chance, you feel that your personal information has been compromised, then you can activate a fraud alert or a credit freeze in your credit file.
Let’s see how exactly a fraud alert helps:-
- A fraud alert requires your creditors to take extra steps to verify your identity before issuing a credit.
- A fraud alert should be requested if you miss or lose your Social Security card or other financial or personal information.
- They are free to use and discontinue.
- The fraud alert lasts for different periods. The initial fraud alert protects your credit for the initial 90 days. An extended fraud alert lasts for another seven years and expires automatically after that. Therefore, you need to renew it if in case you’d like a further extension. Also, there is an option where military personnel may request an active duty alert, which lasts for about a year.
On the other hand, the credit freeze:-
- Puts a restriction on your credit report making it harder for fraudsters to open new accounts in your name. Most of the businesses these days check your credit before issuing a credit. If in case they find a security freeze on your account, then they don’t approve applications to open new accounts.
- It is chargeable and requires a fee of about $5 to $10 to activate. The fee varies as per your place of residence. The good news is that new federal legislation requires all credit-reporting agencies to start free credit freeze services no later than September 21, 2018.
- Gives you a PIN or a password to secure your credit freeze. You shall keep this PIN highly confidential because it will be required whenever you wish to lift the credit freeze, permanently or temporarily. You can temporarily lift the credit freeze from your account in case you need to rent a new apartment, open a new account, or get your credit checked by a potential employer. Just that you may have to pay extra charges to avail this flexibility.
You can contact the following number to request a fraud alert or credit freeze activation:-
Equifax: Call: 1-888-766-0008, Web: https://www.equifax.com/personal/credit-report-services/
Experian: Call: 1-888-397-3742, Web: https://www.experian.com/fraud/center.html
TransUnion: Call: 1-800-680-7289, Web: https://www.transunion.com/fraud-alerts
Be careful with your personal information.
These tax identity thieves thrive by extracting your personal information like your name, Social Security Number (SSN), etc. through a mail or a phone call. They usually impersonate an IRS or tax professional and may also try to scare you with void threats of an arrest, etc. Let’s look at a few ways through which you may prevent your personal information from getting leaked.
- Never carry your Social Security card (SSN) or Taxpayer Identification Number (ITIN) with yourself. Always leave them at a secure location in your home. Carrying such cards and forms which carry your personal information needs diligent care. Hence you should avoid carrying them with you since it increases the chances of theft or loss by negligence.
- Be very skeptical about individuals claiming to be tax or IRS professionals asking your personal or financial information over email or call, unless you initiate such a call. Such bodies never ask for personal information when they contact you. They only ask such information when you contact them, and they need to verify your identity.
- Use firewalls and anti-viruses to protect your personal information on your computer system or online.
- Be very vigilant about clicking on unknown or unfamiliar links online.
Stay updated about tax-related scams
It is well-said knowledge that can be your biggest weapon, and we add – shield as well. Tax identity thieves employ techniques to fool and extract your personal information to dupe you of your tax refunds.
Usually, they pretend to be an IRS or government official, family members, connected companies or charities. They always look out for lucrative ways and try to pull the emotional chord to execute their play. They may also use fake caller IDs, web addresses so that they may seem genuine.
Remember, if the IRS wishes to reach you, they will do so by mail. They never send emails, SMS, or social media contact to seek any information from you. They never ask for immediate payment and threaten to get you arrested on non-payment.
A few signs of tax fraud include,
- Intimidating and urgent demands
- Threats of arrest or dangerous circumstances
- Demand for immediate payments through cash, wire transfer, credit/debit card, etc.
Choose a tax preparer you trust
Fraudsters can go to any lengths to dupe you. In many cases, they also pose like a tax preparer to get their hands on your personal information. Also, free online methods cannot even be relied on for preparing your taxes. Therefore, it is required you do your homework and be vigilant if any tax preparer offers to get you a higher tax refund or request charges based on a higher refund.
Actively monitor your account
You should make it a point to actively monitor your tax account to identify if someone else has filed your returns in your name and report with immediately. Though the redressal procedure may take time but keeping your eyes open and being active on such a website will only help you be more secure.
How to identify a tax identity theft
#1. You can identify a tax-related identity theft if the IRS informs you that a return has already been filed in your name and refund issued.
#2. When the IRS notifies you to pay extra tax or return the issued amount to refund.
#3. If the IRS record shows that you worked for an employer with whom you never worked.
Steps to take in case of a tax identity theft
You can never be 100% safe from tax-related identity theft. You should take preventive measures and are aware of the redressal procedure to take prompt and corrective actions. Here are a few steps you may take to address the problem:-
- Report the case immediately to the IRS. Ensure to respond quickly to the IRS notice received on calling the official number mentioned in the official IRS notice. You can also call on the hotline number 1-800-908-4490 to get specialized assistance.
- Visit the identitytheft.gov to file a complaint with the Federal Trade Commission.
- Activate a fraud alert on your credit card by three major consumer credit bureaus.
- Alert relevant financial institutions and close every fake credit account opened using your personal information.
The point to keep in mind is to immediately revert to the received IRS notice. If the IRS rejects your income tax return calling it duplicate then visit the IRS website and fill the Form 14039. Attach the form to your return and then submit it with the IRS.
The bottom line
Being vigilant and aware should be your top priority to secure yourself from unforeseen tax frauds. Scamsters are always on the lookout for opportunities to dupe taxpayers of their money, especially in the tax season. The best way is to be active on social platforms, keep checking your tax accounts, and be aware of the basic guidelines and tools that can secure you. Feel free to reach the experts of the MyTaxFiler team to help prepare you against such tax-related identity frauds.