Tax identity theft is increasingly victimizing Americans, according to the Internal Revenue Service.
It’s a longtime frightening trend.
For example, as many as 1.5 million Americans were hit by tax-refund fraud in 2013, according to IRS Special Agent Kenneth Hines in a 2014 published report.
IRS data shows 641,690 cases of tax identity theft in the first nine months of 2012. That compares to 242,142 the year before.
In 2008, there were 47,730 cases of criminals falsifying tax returns to grab refund checks, according to Equifax.
“The best defense against identity theft of any kind is to be vigilant in the protection of your personal information,” said Trey Loughran, president of the Personal Solutions unit at Equifax.
“It can take many months for a victim of tax identity theft to finally get his or her rightfully owed refund check,” he added.
Perpetrators are stealing Social Security numbers from the victims and using fake addresses to garner tax returns.
How to avoid tax identity theft
Equifax provides these tips:
- Keep your personal information safe. Keep documents like your Social Security card, Medicare card and birth certificate in a secure place. Only carry these documents with you when absolutely necessary.
- File your tax return as soon as possible to beat a potential scammer to the punch. If you file with the IRS first, the thief will be denied when trying to use your Social Security number for a fake return.
- If filing by mail, take your tax return directly to the post office. Do not leave it in your mailbox where it can easily be stolen.
- Be especially aware of those who prepare your tax report. Only seek tax preparation services from reputable businesses. Check with the Better Business Bureau.
- If you wouldn’t normally file a tax return because, for example, you are a full-time student with no income, be wary of anyone offering to prepare your taxes so you can receive a refund or “free money.”
- Never sign a blank form that someone else will complete for you.
- Don’t fall for a spam scam. The IRS never initiates contact through email to ask for personal information.
- Check your credit report regularly. If your personal information has been compromised for tax fraud, it’s possible that identity thieves will commit other types of identity fraud with this information, such as opening credit card accounts in your name. Consumers can request a free credit report from each of the three credit reporting agencies each year at www.annualcreditreport.com.
Beware — phony tax preparers
“Don’t fall for the promise of big refunds,” said Erin Rodriguez of the Better Business Bureau (BBB). “Be wary of anyone that’s promising, ‘I can get you something larger than the competition.’”
Annually, phony businesses open up to steal your money. They want your tax refund, a phony tax preparation fee, your Social Security number and your sensitive bank information.
Even if you’re victimized, it’s still your responsibility in the eyes of the IRS.
“What consumers are reporting is that they’ve been receiving emails that appear to be from the IRS, but in fact that is a scam,” warned Ms. Rodriguez. “The IRS does not initiate communication through emails.”
If you use a tax preparer, consider these BBB tips:
- Avoid preparers who base their fee on a percentage of the amount of the refund.
- Use a reputable tax professional who signs your tax return and provides you with a copy for your records.
- Have you physically seen the business in years past? Will it be around to answer tax questions months, or years, after filing the return?
- Review your return before you sign it and ask questions on entries you don’t understand.
- Never sign a blank tax form.
- Find out the preparer’s credentials. Is he/she an Accredited Tax Preparer, Enrolled Agent, Certified Public Accountant (CPA), Licensed Public Account or Tax Attorney?
- Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters including audits, collection and appeals.
What to do if you’re victimized:
- First, file a report with the police.
- File a report with the IRS Identity Protection Specialized Unit by calling 1-800-908-4490, and sign an identity theft affidavit.
From the Coach’s Corner, more tax tips:
11 Payroll and Tax Tips for Small Businesses — To stay competitive in this difficult marketplace, it’s vital to be proactive on your taxes.
Tips on Understanding the Mindset of IRS Auditors — An IRS audit is enough to make you tense with cold sweat in the palms of your hands. More businesspeople have complained to me about the mean-spirited treatment at the hands of IRS agents than any other federal agency. Worse, the agents’ frequent lack of common sense is shocking.
8 Strategies for Business Tax Deductions on Your Vacation — Did you ever notice professional organizations hold their conventions at favorite tourist destinations? Why? It’s possible to deduct some of those travel costs as business expenses. If you’re careful, you can write off some expenses on your vacation. That’s not to say you can turn your vacation into a tax deduction.
Even Ordinary Folks Need 10 Best Strategies for Estate Planning — It’s a mistake to think estate taxes only apply to the super rich. Estate taxes hurt ordinary folks. Estate taxes are especially problematic for farmers and small businesspeople, alike, who own their buildings and have capital tied up in equipment to grow crops or to produce products.
Money isn’t everything, but it sure keeps the kids in touch.