Tax season is a time of year that many anticipate refunds, but unfortunately, it's also a prime opportunity for scammers and identity thieves.
Every year, thousands of taxpayers fall victim to fraud schemes that result in stolen refunds, identity theft, and financial headaches. The good news? You can take proactive steps to protect yourself.
In this guide, we'll walk you through common tax return scams, best practices to safeguard your tax return, and what to do if you believe you may have been a victim of tax return fraud.
What is tax return fraud?
Tax return fraud, also known as tax identity theft, occurs when someone uses stolen personal information, such as your Social Security number (SSN) or other identifying details, to file a fraudulent tax return and claim a refund in your name. By the time you attempt to file your real return, the IRS may reject it because a return has already been processed using your credentials.
Fraudsters use many tactics to deceive taxpayers and file a return in their name. Some of the most common tax return scams include:
- Stolen identity refund fraud: Criminals obtain stolen Social Security numbers to file tax returns early in the season and claim refunds before legitimate taxpayers submit their returns.
- Phishing emails and fake IRS calls: Fraudsters posing as IRS agents demand personal information or immediate payment.
- Fraudulent tax preparers: Scammers pose as fake tax preparers promising high returns while stealing personal information and/or charging fees.
- Fake refund deposits: Bad actors deposit a refund into your account, then call pretending to be the IRS, demanding that you return the money.
10 Ways To Protect Your Tax Return From Fraud
1. File your taxes early.
The earlier you file, the less time fraudsters have to submit a return in your name. If a scammer attempts to file after you, their fraudulent return will be rejected.
2. Use strong, unique passwords for tax-related accounts.
If you file taxes online, ensure that your IRS account and any tax preparation software accounts have strong, unique passwords. Use a mix of uppercase and lowercase letters, numbers, and special characters.
3. Enable multi-factor authentication (MFA).
Most tax software providers and financial institutions offer multi-factor authentication. Enabling this adds an extra layer of security by requiring a second form of verification, such as a text message code or authentication app, when logging in.
4. Protect your Social Security Number (SSN).
Your SSN is a key target for identity thieves. Keep your Social Security card in a safe place and never share your SSN via email, text, or over the phone unless you are certain of the recipient's legitimacy.
5. Be wary of unsolicited IRS communications.
Many people mistake phishing or smishing attempts as legitimate communications from the IRS. If you're unsure, check out the IRS website to learn more about how and when the IRS contacts you.
If you receive a suspicious message claiming to be from the IRS, do not respond or provide personal information. Instead, report phishing attempts to [email protected].
6. Check your IRS account for unusual activity.
You can create an online account with the IRS to monitor your tax history and check if any returns have been filed in your name. If you notice any suspicious activity, report it immediately.
7. Shred your tax documents.
Sensitive information such as W-2s, 1099s, and tax returns should never be discarded intact. Use a shredder to destroy documents before throwing them away to prevent dumpster divers from stealing your data.
If you don't have a shredder, you can always attend one of Apple FCU's FREE Shred Events! Check out our website to learn more about our upcoming Shred Events.
8. Use a trusted tax preparer.
If you hire a professional tax preparer, verify their credentials. Look for Certified Public Accountants (CPAs), IRS-enrolled agents, or reputable tax preparers with Preparer Tax Identification Numbers (PTINs). Avoid preparers who promise unusually high refunds or charge fees based on refund amounts.
9. Monitor your credit and financial accounts.
Keep an eye on your bank statements and credit reports for signs of fraudulent activity. You can monitor your credit directly within Apple FCU Online or Mobile App. Simply tap Plan and Learn, then View Credit Score to activate the service and get started.
10. Request an Identity Protection PIN (IP PIN) from the IRS.
An Identity Protection PIN (IP PIN) is a six-digit number that the IRS assigns to eligible taxpayers to prevent unauthorized returns. Once you have an IP PIN, your tax return cannot be filed without it. You can request one through the IRS website.
What To Do If You Suspect Tax Fraud
If you believe someone has attempted to file a fraudulent tax return in your name, take the following steps immediately:
1. Place a fraud alert on your credit report with the three major credit bureaus: Experian, Equifax, and TransUnion.
2. Report the fraud to the IRS to alert them to your situation and prevent further fraudulent activity.
3. Contact the Federal Trade Commission (FTC) at identitytheft.gov to report identity theft and follow recommended recovery steps.
4. File a police report if you experience identity theft, as this may help you dispute fraudulent transactions.
5. Continue to monitor your accounts and change your passwords to secure any compromised financial information.
Stay One Step Ahead of Tax Fraud
Tax fraud can be stressful, but taking proactive steps now can help protect your identity, refund, and financial well-being.
At Apple FCU, we're committed to helping you safeguard your finances. From top-tier cybersecurity to educational resources, we're here to keep you informed and protected.
Visit our website and follow us on social media for more security tips, upcoming Shred Events, and fraud prevention tools to help you stay one step ahead of fraudsters.
