Preventing Tax Identity Theft

(From the Financial Literacy Blog) – Tax identity theft, which is the filing of fake tax returns using stolen identities, is a form of tax fraud that affects hundreds of thousands of taxpayers every year. Unfortunately, identity thieves aren’t filing tax returns in their victims’ names to help them through the tax-filing process. Instead, they are after their victims’ tax refunds. Knowing what steps individuals can take to prevent tax identity theft can help ensure they receive their refund—if they anticipate getting one. Here are some ways people can reduce their risk:

File Returns as Soon as Possible

The earlier someone files their tax returns, the less likely they’ll fall victim to tax refund theft. If an individual files their return, any further attempts to file in their name will be automatically denied. Even if a fraudster does gain access to their Social Security number, the identity thief wouldn’t be able to file or gain access to the refund.

Keep Personal Identifying Information Private

In order for an identity thief to file a fraudulent return, they would need to have their victim’s personal identifying information. Identity thieves can inflict a lot of financial harm with a lost or stolen wallet, mail, or documents that are thrown away. To limit the chances of identity theft, it’s important for people to safeguard important documents at home, such as their Social Security card, birth certificate, passport, financial statements, and tax documents. People should put these documents in a secure location. If any documents with personal information on them are thrown away, tear or shred them beforehand. Sensitive materials such as financial account statements, credit applications or offers, insurance forms, medical statements, checks, and utility bills can be a goldmine for thieves if they search through the trash. Keeping information safe in the digital world is equally as important, too. To protect their information, people should use multi-factor authentication on all their accounts, create strong passwords, and update their software regularly.

Choose a Trusted Tax Preparer

Before someone chooses a tax preparer or online tax filing service, they should do their homework to ensure they are a trustworthy resource. People should look up customer reviews or ask for references––that way it increases the odds that the person or service is legitimate and will keep their data secure.

Individuals may even qualify for free and trusted tax preparation services through Ca$h Maine. With a variety of options for tax prep, Ca$h Maine volunteers can securely help people through the filing process.

Be Aware of Phishing Attempts

Scammers use email, fake social media accounts, and other forms of online communication tools to try and steal passwords, account numbers, Social Security numbers, and more. With that information, they can gain access to peoples’ accounts, sell their information to other scammers, and file fraudulent tax returns in their name. To protect themselves, people should enable email spam filters, ignore friend or follow requests from users they are not familiar with, and keep an eye out for anything that looks suspicious. People shouldn’t click on suspicious-looking links or open any unexpected attachments. The use of poor spelling or grammar in sentences also is a red flag. Further, if someone receives a communication that threatens a consequence or opportunity loss unless urgent action is taken, it’s likely a scam. This approach is used to rush people into action before they have an opportunity to study the communication for potential flaws or inconsistencies.

Monitor Financial Accounts

People should be actively monitoring their accounts for suspicious activity. If someone sees something out of the ordinary through online or mobile banking, or on their statement, they should contact their credit union to report it. Suspicious activity may mean someone has their personal information, which can be used to file fraudulent returns. People also should  monitor their tax information on the Internal Revenue Service’s website. If someone discovers they’ve been a victim of identity theft, they should report it immediately to the IRS.

The Bottom Line

Whether or not you’re expecting a return, following these tips can help prevent your identity from being stolen. Your personal identifying information is one of the most valuable resources to a fraudster, so practicing good habits and taking the proper steps can lower your chances of experiencing financial headaches down the road.

If you have any questions about account security or protecting your personal identifying information, contact your local credit union.