Avoid The Various Risks of Tax Fraud

February 23, 2017

Tax season has officially arrived, and many consumers are already stressed by it. Getting together all their financial documents from the past year and making sure all the details of a filing are accurate can often be difficult on its own. Mixing in the threat of tax-related identity theft doesn't help matters. It's wise for taxpayers to make sure they're taking all precautions to avoid headaches later on.

When people think about tax fraud, the idea of someone filing returns as other people may not be the first thing that springs to mind. However, this crime affects millions of people and costs the federal government billions of dollars each year, making it important for people to understand how these scams start.

Identifying phishing

There are many ways in which criminals may attempt to make first contact with potential victims, according to Quicken Loans. For instance, they may call or email taxpayers at random, present themselves as professionals working for any number of organizations (including the IRS) and try to trick their marks into revealing personal information (names, addresses, Social Security Numbers). Later, they could use that information to commit tax fraud.

With this in mind, it's vital that consumers know the best ways to identify these kinds of phishing attempts. As a general rule, anyone claiming to be from a business or government agency and asking for – or asking people to "confirm" – personal data online or over the phone should be treated with caution.

What can be done?

Experts generally advise that consumers never share tax- or identity-related information with anyone they don't trust, lest it be used for this type of identity theft. In addition, it's important for consumers to never click on email links or download attachments they don't recognize, let alone entering information into sites they aren't familiar with. A good rule of thumb is to look for a little lock icon in the address bar of their web browser, which indicates the data is going to be securely transmitted. This is especially important for anyone who is considering filing their taxes online.

What to do if you’re a victim

Of course, even the most significant precautions don't always result in people totally insulating themselves from tax fraud, and as such it's also important to have the tools to recognize such crimes before they go too far, according to the Federal Trade Commission. Perhaps the best sign that a fraudulent tax filing has been made is when the IRS sends back a rejection letter, stating that a return has already been filed for an individual. Incidentally, this is why it's important to file taxes as early as possible, so that even if people have been victimized by SSN theft, thieves are still beaten to the punch on getting a return on file with the IRS.

But when these letters do arrive, consumers need to be able to know what to do. That should start with contacting both local law enforcement and the IRS. But afterwards, the FTC also recommends obtaining all copies of a person's credit report and filing an identity theft complaint with the FTC. That could even include investing in credit monitoring services, like Identity Guard, to continue to identify any additional attempts to use their personal information.

The more you know about the risks you face this tax season, the more you can help yourself identify and combat tax-related identity theft.

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