Tips & Advice

Income Tax Fraud

Presented by Larry Larsen, Director of Cyber Security

The yearly income tax cycle is an exciting time for everyone to celebrate the successes and milestones of the previous year.

Yeah, right.

Actually, for most of us it's stressful, time-intensive and often confusing, what with the changes in the U.S. Tax Code from year to year. On top of all that, recent news reports about stolen Social Security Numbers gives us new concerns to worry about.

In 2016, there were a number of cyber breaches in which W-2 Wage and Tax Statements were stolen.

Last year the IRS reported as many as one million Social Security numbers were stolen; every one of those could result in a fraudulent tax refund to the criminals.

Organizations in many industries fell victim to these attacks, which started with "phishing" emails sent to employees from spoofed company executives, and so far 2017 is expected to be worse.

The impact of these breaches is significant – W-2 forms contain enough personal information to file for fraudulent refunds or obtain more personal information for identity theft activities. Any time a Social Security Number is stolen or compromised, the potential for theft is huge.

That's not necessarily money directly out of the victim's pocket, but it does cause a lot of time and frustration to get the fraud straightened out before a legitimate return can be filed.

The IRS provides a number of resources to help with these kinds of fraudulent activities. Their website lists the many ways a taxpayer might suspect tax fraud, with the appropriate forms and information to get it resolved. While the IRS has a reputation for being an insensitive bureaucracy, they're actually very helpful when a problem comes up. Don't be afraid to reach out to them if you suspect anything with your taxes.

Preventing income tax fraud can be done, with a little forethought and planning. Early filing may be the best defense; most of the paperwork needed to file must be sent to you by the end of January. Unless you have some unusual filing circumstances, you can file your taxes as early as February. Getting your return filed first prevents the cyber-crooks from getting in ahead of you with stolen information, and puts the burden on them to prove their validity, which of course they can't do.

Other actions you can take to prevent fraud are:

  • Keep your computer firewall and security applications up to date and active
  • Never respond to an email purportedly from the IRS; they will never email you and ask for information
  • Never toss your tax forms or paperwork in the trash; if you don't keep them on file, destroy them with a fine-cut shredder before you throw them out
  • File online and request direct deposit for your refunds to minimize the chance of interception by criminals.

Last but not least, protect your Social Security Number or Taxpayer Identification Number and never use it for any other purposes.