7 Tips to Reduce the Risk of Tax Identity Theft

7 Tips to Reduce the Risk of Tax Identity Theft

Most people are not fond of preparing their tax returns, and the fear of tax identity theft adds to this stress. For identity thieves, tax season should be called hunting season. It is their favorite time of year. Why? Because during tax/hunting season, millions of Americans send confidential personal information over the Internet, via fax, and through the mail. Around the first of the new year, your employer and other financial institutions will begin preparing, filing, and mailing confidential information (W-2, 1099 forms, and several other tax forms containing sensitive data).

In the year 2021, the IRS identified over $10 billion in tax and other fraud. These fraudsters work around the clock to steal your name, social security number, and additional personally identifiable information (PII). Their purpose is to file a fraudulent tax return to get your refund. This is most prevalent earlier in the filing season.

In the last two years, unemployment scams have also been lucrative for these thieves, especially during the COVID-19 pandemic. States have received an overwhelming increase in benefits claims from millions of first-time filers. Many victims of unemployment fraud clasims won’t find out about the fraudulent claim filed until tax forms ( Form 1099-G) arrives for benefits they never received.

Identity thieves also target the dependent’s social security numbers to take the dependent deductions and credits. Taxpayers typically find this the hard way when they file a return listing the dependent and are denied the deduction and/or credit.

Seven Tips to Reduce Your Risk of Tax Identity Theft

Don’t leave yourself vulnerable to identity thieves during tax/hunting season. Below are the crucial steps to follow to protect yourself, your dependent deductions/credits, and your tax account:

File your taxes early. Fraudsters often file early to beat legitimate taxpayers to the refund. It then goes undetected for months, until the IRS and/or state reject the actual return. Taxpayers often don’t even find out they (or their dependents) are victims of tax identity theft until their own tax returns are rejected.
Never provide sensitive information via email, text, or over the phone. These identity thieves often mask themselves with what appear to be legitimate emails, text messages, or phone caller IDs. They reach out to obtain personal information that they can use to file a return on your behalf. The IRS says it is unlikely to initiate contact with taxpayers using email, text and often not the phone. IRS uses notices and letter to communicate with taxpayers instead.
Confirm any requests for information with a verification phone call to the IRS. Although a notice in the mail may seem legitimate, it’s relatively easy for fraudsters to create a legitimate appearing notice or letter. You should always confirm any request for information by calling the IRS directly at 800-829-1040.
Choose a trusted and reliable tax preparer. If you or your tax preparer file returns online, make sure the method of connection to the internet is secure.
Hand-deliver or securely ship personal sensitive documents to your tax professional. Ensure your tax documents, especially W-2 forms and sensitive documents containing your social security number(s), get into the right hands. Use Certified Mail or the Signature Required mathods to confirm the delivery of your documents to the intended recipient.
Fill out and submit an Form 14039-IRS Identity Theft Affidavit, if Your Determine You are a Victim. IRS Form 14039, Identity Theft Affidavit, is a fillable form on the IRS website and should be filled out if you try to e-file your taxes and it gets rejected due to a duplicate filing. Fill out the form, print it, attach the form to your paper return, and mail entire package to the IRS.
Regularly check your credit report. This year, consider checking it during tax/hunting season.