Taxes are one of the two certainties of life.
But we could add a third: tax season schemes that attempt to steal your identity — and possibly your refund.
Between January and April, authorities expect a wave of phishing scams by phone and email related to taxation and cases of identity theft. There are two common varieties of tax evasion, one that involves Social Security numbers that are believed to have some kind of suspicious activity, and another that threatens people with a tax bill from a bogus government agency.
The first involves scammers who use an email or phone call to threaten to cancel or suspend the victim’s social security numbers due to overdue taxes. Fraudsters pose as IRS agents, who threaten their targets with arrest and legal action unless they pay the fine “immediately.” Remember that the IRS does not engage taxpayers via email, phone calls, text messages, or social media to request personal or financial information.
The second scheme involves mailing an official-looking letter that threatens an IRS lien or tax levy owed to a non-existent government agency such as the Bureau of Tax Enforcement. The letter attempts to scare the recipient into paying the fine using a specific payment method such as a prepaid debit card, gift card, or wire transfer. (Note: the IRS never uses these payment methods.)
What to look for in tax ID scams
Tax identity theft is particularly difficult to detect before the fraud occurs. But here are some common telltale signs:
- If your federal tax return has already been filed by someone else using your personally identifiable information, they may try to stop your refund. When you file your return, the IRS will send you a notification letter stating that your refund has already been issued.
- Sometimes thieves who stole your social security number will use it to get a job and avoid paying taxes. Their employers will report this income to the IRS. Once the IRS detects the discrepancy, they will send you an action letter stating that you have not reported all of your income.
- Over the past two years, there has been an outbreak of COVID-19 scams related to economic impact payments, where identity thieves use call, text, and email phishing attempts to get you ask to verify or provide your financial information so you can get a government payment or refund faster.
Victims of tax identity fraud usually only find out they have been defrauded when the IRS refuses to process the legitimate return because the taxpayers listed have already filed returns and refund checks have been issued.
Five recommendations to avoid tax identity theft
Here are five steps you can take to avoid becoming a victim of tax identity theft:
- Secure your sensitive information. Never send sensitive personal information via email or SMS. The IRS will never contact you through these methods, so if you receive email or text requests that appear to be from the IRS, ignore them. If you produce online, always use a secure connection.
- Drop off early. If you have the opportunity to file your return early, do so. The IRS processes returns primarily on a “first-come, first-served” basis, and filing early takes advantage of criminal-avoidance deadlines.
- Protect your social security number. Be very suspicious if (1) you receive a letter from the IRS about a tax return you haven’t filed; (2) are not permitted to file your tax return electronically due to a duplicate Social Security number; (3) receive a notification that an IRS online account has been created in your name when you have done nothing; or (4) you receive a notice from the IRS stating that you received salary from an unknown employer.
- Check your credit report regularly, at least once a year. You can download your credit report free of charge once a year at
during tax time and freeze credit if necessary.
- Register for an Identity Protection PIN. Last year, the IRS made its Identity Protection PIN program available to all taxpayers. Previously only available to victims of identity theft or taxpayers in certain states, the Identity Protection PIN is a six-digit code known only to the taxpayer and the IRS. This helps prevent fraudsters from making false claims using your personally identifiable information.
If you or your business has been the victim of tax-related identity theft, contact the police or FBI and visit the
website to learn more about other steps you can take.
The opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations to any individual.