With the 2021 tax filing season officially underway, it’s a great reminder to file your taxes as soon as possible before the April 15 deadline to avoid potentially becoming a victim of fraud. Specifically, tax ID fraud, which is a widely concerning issue in the U.S., with $2.3 billion in such scams for fiscal year 2020 alone. According to a news release from Oregon based Umpqua Bank, the rise of other types of fraud, such as COVID-19-related scams, 2021 could be an even more opportune time for criminals looking to capitalize on both business and consumer taxpayers.
To help speed up refund payments during the COVID-19 pandemic, the IRS urges taxpayers to have all of their documents ready to file electronically and with direct deposit set up ahead of time—and for good reason:
Fraudsters can use basic personal information (often found online), your Social Security Number (SSN), and other stolen information (e.g., W-2 tax forms) to file your taxes and route your refunds to their own bank account. Often, victims of such scams find out only after their taxes have been filed either by themselves or a hired preparer, only to receive a letter of rejection from the IRS due to multiple filings.
And, if there’s a tax return to be filed, it could be at risk of tax ID fraud.
“Criminals will go after any tax and personal details they can get their hands on to file illegitimate returns,” notes Kathryn Albright, Global Payments and Deposits Executive with Umpqua Bank, a Portland, Ore.-based institution with $29 billion in assets. “Both businesses and consumers should be on alert for tax ID fraud, because it could really hit anybody who has to file.”
Here are some ways you can help protect yourself from tax ID fraud for this and future tax seasons:
- File your taxes as soon as you possibly can. This is the most prominent recommendation by the IRS, and it can be critical to securing your tax filings—and identity. If you beat fraudsters to filing your own taxes, they likely won’t control where your refund goes.
- Keep your SSN private. There are countless scams designed to steal SSNs (and other sensitive personal information), which in turn can help fraudsters file illegal tax returns. Don’t provide such information to unfamiliar contacts—especially if you’re unexpectedly asked to do so by a stranger via email, text message, or even on social media (because the IRS doesn’t use those methods to contact individuals).
- Research potential tax preparers before providing them with sensitive personal information. If you elect to have somebody else do your taxes, be sure they’re a qualified, trusted, and reputable preparer. Use the IRS’s searchable directory to help you find a qualified tax professional if necessary.
- Use secure, trusted devices when filing your taxes online. When collecting your tax documents and then filing online, be sure you’re using as secure a computer as possible that’s running the most updated versions of security software, Internet browsers, and operating systems—and that’s connected to a trusted, safe Internet connection. (For example, if possible, consider using a personal laptop connected to your home Wi-Fi network rather than a shared computer with a public Internet connection.)
- Consider placing a security freeze on your credit reports. Freezing your credit reports with the top three credit bureaus (Equifax, Experian, and TransUnion) could help prevent further damages if a fraudster does steal your identity.
- Request an Identity Theft (IP) PIN. Such codes are typically assigned to victims of identity theft to help them confirm their identity with the IRS and other federal agencies moving forward. However, eligible parties may request one for added security.
“It’s a good idea to get into the habit every tax season of doing everything you can to file early—and securely,” says Albright. “Start with a checklist, get your documents as soon as they become available, and get your preparation in order at the beginning of January so that you can file early. Then, keep an eye on things, like your credit reports and bank account details, throughout tax season to be sure there’s no unexpected or unusual activity that could be linked to fraud.”
What to Do if You Discover You’re a Victim of Tax ID Fraud
If you make the unfortunate discovery that somebody stole your identity to file your taxes, consider performing the following actions as soon as possible:
- Contact the IRS and complete form 14039 (Identity Theft Affidavit) or call (800) 908-4490 for specialized assistance.
- Follow the instructions that you receive in any letter from the IRS alerting you of a potential stolen tax identity theft situation. Then, report the situation to both the IRS and the Federal Trade Commission (FTC) at identitytheft.gov to initiate a recovery plan.
- Secure your IP PIN and any other details you receive from the IRS and other federal agencies/law enforcement to prevent future identity theft.
- Place a fraud alert on your credit reports—and consider freezing them altogether if you haven’t already done so.
Additional Resources
For more information about preventing tax fraud, visit these additional FTC and IRS resources.
