Identity Theft Tax Fraud

Seven ways to avoid being a victim.

Filing your taxes is a rite of passage for those of us in working world, one that can be confusing, exhausting and daunting. Unfortunately, fraudsters take advantage of this often overwhelming time with an ever-growing scam that involves stealing your personal information, such as your social security number (SSN), and using it to file (and claim) your tax refund.

Tax time is stressful enough without having to deal with nefarious characters trying to steal your identity. Learn more about this type of fraud and ways to protect yourself from becoming a victim!

What is Identity Theft Tax Fraud?

There are two primary types of identity theft tax fraud — both of which can cause major headaches, delays, and even penalties for the taxpayer who has fallen victim:

Tax return fraud occurs when a scammer uses stolen personal information to file a tax return in order to claim a refund. They either direct the refund money into a separate account set up for themselves or steal the refund check when it gets delivered. Unfortunately, taxpayers often don’t realize they’ve fallen victim to this type of financial scam until they submit their taxes and receive a rejection notice from the Internal Revenue Service (IRS) for a duplicate filing.
Employment fraud happens when someone steals a victim’s SSN in order to gain employment. The employer will report the income they paid the scammer to the IRS but it will be attached to the victim’s SSN. The IRS will subsequently allege that the victim did not report all of their earned income -unbeknownst to the victim that there was foul play involved).

Alas, these types of identity theft scams can cause major financial pain and emotional distress for victims. They may need to spend hours, days, and weeks communicating with the IRS to get their records straightened, and worst yet can even be accused of tax fraud themselves.

Common Signs of Tax-Related Identity Theft

These are a few red flags the IRS encourages taxpayers to be aware of during tax season as you prepare to file your taxes:

You receive a notification that your tax return has already been submitted.
You receive a notice regarding an account with the IRS that you did not initiate.
The IRS alerts you that your account has been disabled or accessed.
The IRS has records of earned income from an employer that you never worked for.

How the IRS Communicates

Additionally, you should be aware of the ways the IRS will (and will not) contact you. Fraudsters impersonate the IRS every year in order to gain personal information or money, so it’s important to distinguish between unofficial and official communication.

The IRS does not:

Initiate communication with you via text, email, or social media to discuss or ask for personal information.
Call you to threaten you with lawsuits or arrests.
Demand that you pay with a specific method of payment.
Ask for your Identity Protection Pin via email, text, or phone call.

The IRS generally communicates via mail through the U.S. Postal Service. There are rarer circumstances where IRS representatives may pay an on-site visit, (such as for an audit) but they will communicate with you via mail beforehand.

Now that you have a general understanding of the two types of identity theft tax fraud, common signs of tax-related crimes, and how the IRS does and does not communicate, it’s time to discuss how to help protect yourself from identity theft tax fraud.

7 Ways to Help Protect Yourself from Identity Theft Tax Fraud

Regrettably, there will likely always be some risk for identity theft given our highly digitalized world; however, there are many proactive steps you can take to help mitigate your personal risk.

Protect Your Social Security Number
File Early
Get an Identity Protection Personal Identification Number (IP PIN)
Know What Phishing Looks Like
Safeguard Your Devices
Properly Store (Or Destroy) Your Documents
Be Smart With Your Passwords
Bonus: Monitor Your Vulnerable Loved One’s Information

1. Protect Your Social Security Number

Social security numbers are extremely important personal pieces of information; unfortunately, they can land in the wrong hands and can cause a nightmare for victims. Every time you give out your SSN, it increases your chances of having it used for improper purposes.

In order to protect your SSN, it is highly recommended to not carry around your social security card and instead have it in a secure location. Additionally, you should shred any documents that have your SSN on them, never use your SSN number as a password, and don’t send your SSN electronically.

When someone requests your SSN, ask them why they need it and if it’s absolutely essential that you share it with them. Sometimes another form of identification can be used instead.

Check your SSN history here to ensure no one has fraudulently used your number. If you suspect your SSN has been compromised, contact your local Social Security Administration office immediately.

2. File Early

While you’ll want to do everything possible to protect your identity and personal information, you can also help protect yourself from identity theft tax fraud by filing early. The more time you take to file, the longer scammers have to file your return for their benefit.

Certainly, it can take some time for all the organizations you’ve worked for or banked with to send you the necessary paperwork for you to file, but once you’ve received all documentation, file as early as possible to ensure you’re the one receiving your earned refund.

3. Get an Identity Protection Personal Identification Number (IP PIN)

An IP PIN is a special provision offered by the IRS in order to safeguard taxpayers’ SSNs from being used on fraudulent tax returns. According to the IRS, anyone with a SSN or Individual Taxpayer Identification Number who can identify themselves is eligible to receive an IP PIN.

The IP PIN is a unique 6-digit number assigned to you and is valid for one tax season.

This can be extremely beneficial for those whose SSN has been compromised or who have been victims of identity theft in the past.

4. Know What Phishing Looks Like

Phishing involves scammers sending links or messages to victims while impersonating well-known establishments (like the IRS) in order to steal personal information, such as your SSN. Knowing a few common red flags can help you quickly assess unexpected communications:

Communication is overly urgent or aggressive
You’ve been told that there’s been suspicious activity with your accounts
You’ve been asked to confirm personal information or update payment details
You’ve been sent links to click on

5. Safeguard Your Devices

The easiest way to protect your information on your devices is to stay up to date. There are often important application, browser, or system security updates that are recommended. Once you’ve confirmed the legitimacy, go ahead and download the latest update in order to help protect your information. You may also be able to set your settings to automatically update once the next version is available.

In addition to staying updated, you can purchase antivirus software with anti-spyware capabilities. This will help protect your devices from viruses that can hurt your device and from thieves from collecting your personal information.

6. Properly Store (Or Destroy) Your Documents

Many important documents are online and therefore should be stored in a secure, password-protected location. For any hard copies you have in your possession, such as your social security card or car and house titles, make sure they are securely stored in a safe place.

For any papers containing confidential information (such as your name, phone number, address, credit card numbers, account numbers, or social security numbers) that are not necessary to hold onto, be sure to properly shred of them. If you don’t have a personal shredder, you can find a local shredding event or go to a local mailing business or recycling center. Lafayette Federal hosts several on-site shred events through the year. Be sure to check the Events page to find out when one is being hosted in your area.

7. Be Smart With Your Passwords

It can be cumbersome to keep up with all the different passwords required today. But strong passwords are critical to keeping your personal information protected. Being smart with your passwords can help prevent your identity from being stolen.

It’s tempting to reuse the same password for simplicity’s sake. But unfortunately, if there’s a data leak with just one company using your password, it could compromise multiple accounts. Therefore, we recommend using different passwords for every single account you have. If you’re not sure how to best manage your passwords, consider using a password keeper application.

Additionally, don’t use passwords that could ever be easily guessed or passwords that have ever been compromised in the past. Using multi-factor authentication is a highly recommended way to further secure your accounts. Instead of simply entering a password, authentication also requires you to provide a second form of authentication (such as a code sent to your phone or email).

8. Bonus: Monitor Your Vulnerable Loved One’s Information

Unfortunately, children are at a high risk of identity theft because scammers can use their stolen SSNs for years without being noticed. Scammers might attempt to file a tax return with your child’s SSN or claim them as their own dependent in order to receive a child tax credit. Ensure your child’s personal information is protected and only shared when absolutely necessary.

To help protect your children’s information further, you can set up security freezes with the three different credit bureaus for your child’s credit report or sign up for credit monitoring.

Additionally, if you have any elderly family members who need assistance with their banking, paperwork, and taxes, offer to help them check for the common identity theft signs. Consider checking their credit reports, helping them file early, and reminding them never to share personal information with non-trusted individuals.

What to Do If You Are a Victim of Identity Theft Tax Fraud

Fortunately, the IRS is on alert for possible fraud and will regularly check submitted returns. Furthermore, they will flag suspicious returns for additional review. If they catch the fraud and contact you about it, be sure to follow their instructions carefully.

If you think your identity has been stolen and/or someone has claimed a fraudulent tax return using your personal information, contact the IRS immediately. You might not be able to correctly file your taxes through the typical online method — you might need to submit a paper copy instead. You should still plan to pay any tax you owe while you wait for the situation to be rectified.

In addition to reporting the fraud to the IRS, you should also file a complaint with the Federal Trade Commission (FTC), file a police report, and sign up for credit monitoring. If you know your SSN number has been compromised, you can request to Block Electronic Access by calling 1-800-772-1213.

File Your Taxes Confidently With Lafayette Federal

At Lafayette Federal Credit Union, we are committed to helping our members’ financial health. We offer member-exclusive tools and resources, including TurboTax and H&R Block discounts, as well as low-cost identity theft protection. And, your membership entitles you to receive both credit monitoring and restoration services.

In addition, we offer our members a safe and convenient place to bank with favorable terms and rates. Our top-notch member service representatives can’t wait to help you today!