Along with tax season comes a frighteningly easy form of identity theft that can cause you a heap of trouble. Thieves with just a little information about you can file a bogus tax return in your name and claim a huge refund.
While it doesn't always work out so well for the fraudster, the IRS still gives out billions each year in fraudulent refunds. In 2014, for example, it paid out $5.8 billion that it shouldn't have, and that's just the fraud it identified. Unfortunately, this year that could be your money.
Your first clue that thieves have stolen your tax refund is when you try to file your tax return and the IRS rejects it because it already has "your" tax return on file. After that, it's a huge hassle to correct the problem, and you could spend months waiting on your refund. If you were counting on that money, then it's a serious financial hardship.
The best way to avoid an unfortunate episode with your taxes is to file your tax return as early as possible to get it in ahead of the fraudsters. Once you file, their window of opportunity is closed.
However, early filing isn't practical for everyone, so we're going to talk about some other ways to keep your tax return safe during the next few months.
Protect your Social Security number
Your Social Security number is THE key piece of information a scammer needs to file a bogus return on your account. To keep it safe:
- Do not carry your Social Security card in your wallet or purse. Keep your Social Security card and any other document that shows your Social Security number in a safe place. Learn the five steps to survive a lost or stolen wallet.
- Only share your Social Security number when absolutely necessary. For instance, though a doctor's office will often request your Social Security number, rarely are you actually required to provide it. Learn more about that and other things you need to know before your next doctor's visit.
- Safeguard your personal financial information in your home and on your computer. Change online passwords regularly. Check out our tip for making safe and secure passwords.
- Review your credit reports and your Social Security Administration earnings statement each year for accuracy. Check out your credit report and score for free. A big unexpected change in your credit score might mean a thief has struck.
Get an IRS Identity Protection PIN
The Internal Revenue Service is well aware that crooks are trying to steal your identity. It also knows that all a hacker needs to file a fraudulent claim on your account is your name and Social Security number. That's why the IRS has developed an identity protection tool for certain taxpayers.
An Identity Protection PIN is a six-digit number assigned to eligible taxpayers that helps prevent the misuse of your Social Security number on fraudulent federal income tax returns. You have to use the IP Pin on every tax return to prove it's you filing it.
The IRS PIN program is not yet available for every U.S. taxpayer. Getting an Identity Protection PIN starts with figuring out if you're eligible. Read more here to see if you are eligible for this identity protection.
What to do if you are a victim of tax identity theft
Report the crime. File a report with your local police and file a complaint with the Federal Trade Commission at www.identitytheft.gov or by calling the FTC Identity Theft Hotline at 1-877-438-4338.
Request a fraud alert. Contact one of the three major credit reporting agencies (Equifax, Experian, or TransUnion) and ask that a fraud alert be placed on your credit records.
Close fraudulent accounts. Close any credit or financial account that has been tampered with by a thief or opened without your permission.
Contact the IRS. Call the number provided on the IRS notice informing you of the fraud. Complete IRS Form 14039, Identity Theft Affidavit. You can use a form at IRS.gov, print, then mail or fax the form as needed as you clear your tax record.
Pay your taxes. Be sure to continue to pay your taxes and file your tax return on time, even if you must do so by mailing in paper forms.
Stay diligent. If you contacted the IRS about taxpayer ID theft and did not receive a resolution, contact the Identity Protection Specialized Unit at 1-800-908-4490 about your case.