Tax season brings more than filing deadlines and the hustle and bustle of collecting all your financial documents; unfortunately, it also brings an increased risk of tax identity theft. Scams of all kinds are on the rise, including those in which bad actors take advantage of stolen personal information to file fraudulent tax returns. Even worse, they're often able to pull it off before the rightful taxpayer submits their own. All too often, people don't realize they've fallen victim to this particular scam until the IRS rejects their legitimate tax return because one has already been filed in their name.
Understanding how tax identity theft happens is the best way to be prepared and safeguard your financial security. Here's what you should know about tax identity theft, how it happens, and how to protect yourself.
How Tax Identity Theft Happens
Tax identity theft occurs when criminals use a stolen Social Security number and other personal details to file a fraudulent tax return and claim a refund. The victim only learns about the fraud when attempting to file their return, only to have it rejected as a duplicate.
Common ways scammers obtain personal information include:
- Phishing scams: Fraudulent emails, phone calls, or texts pretending to be from the IRS requesting sensitive information.
- Data breaches: Large-scale security breaches exposing Social Security numbers and financial records.
- Mail theft: Stolen tax-related documents, such as W-2s, from mailboxes.
- Fake tax preparers: Fraudsters posing as legitimate tax professionals to collect private information.
Steps to Reduce Your Risk of Tax Identity Theft
While tax identity theft is a growing problem, there are several ways to reduce your risk:
- File your tax return early. The sooner you submit your return, the less time scammers have to use your information fraudulently.
- E-file through a secure network. Electronic filing is safer than mailing a paper return, as it reduces the risk of your personal details being intercepted.
- Use strong passwords and multi-factor authentication. Enable these security measures for tax preparation software and financial accounts to prevent unauthorized access.
- Never share personal information via phone or email. The IRS will never call, text, or email to request personal or financial details. If you receive an unexpected message claiming to be from the IRS, assume it's a scam.
- Store tax documents securely. Keep digital copies encrypted and paper copies locked away. Once outdated, shred physical records to prevent theft.
What to Do If You're a Victim of Tax Identity Theft
If the IRS rejects your tax return due to a duplicate filing, it is absolutely crucial to take action immediately:
- Contact your CPA: A tax professional can guide you through the steps to resolve the issue.
- Respond to IRS notices: If you receive a letter from the IRS regarding a fraudulent filing, follow the instructions carefully.
- File IRS Form 14039 (Identity Theft Affidavit): This notifies the IRS of the fraud and helps prevent further unauthorized tax filings.
- Monitor your credit reports and financial accounts: If your tax information has been compromised, other personal accounts may also be at risk.
How a Tax Service Guarantee Can Help
Myrick CPA's Tax Service Guarantee provides comprehensive assistance for identity theft victims, offering:
- Expert evaluation of IRS and state tax notices: Professional review and explanation of tax-related identity theft issues.
- Assistance in responding to the IRS: Myrick CPA drafts letters and other correspondence to help resolve cases efficiently.
- Guidance in restoring accurate tax records: Support throughout the process to ensure tax filings reflect the correct financial information.
Stay Protected with Expert Tax Support
Tax identity theft can create serious financial headaches, but with the proper precautions, you can reduce your risk. Filing early, securing your personal information, and working with a trusted CPA can help protect your tax return and financial future.
If you have concerns about tax-related identity theft or need professional assistance handling an IRS notice, Myrick CPA is here to help. Contact us to learn more about our Tax Service Guarantee and expert tax protection strategies.
