Tax-related identity theft occurs when someone uses your personal information to file a tax return and get your tax refund. It might seem like a good thing for someone to file taxes on your behalf. However, the identity thief is not keen on paying your taxes, but on collecting the tax refund instead of you!
Prevention is always the best policy with identity theft. This is because the damage arising from the misuse of your personal information can follow you for years.
Here are some measures you should take to prevent tax-related identity theft.
1. Keep Your Social Security Number Safe
Most tax-related identity theft happens when the thief accesses your social security number. Therefore, it’s important to keep your SSN safe and private. Leave it home and store it in a secure location.
If you have to share your social security number, do so only when it is absolutely necessary and understand how the person requesting it will be using that number. Never share your social security number over the phone, via email, or by text – identity fraudsters often use these channels to get sensitive information from taxpayers.
2. Use Updated Security Software
Most people file their returns online. Identity thieves could take advantage of weaknesses in your computer security to access your information. Install reliable firewalls, and anti-spam and anti-virus software to keep your computer safe.
Use strong and unique passwords on your computer for all financial sites, and change these passwords regularly.
Do not save your passwords on your computer, especially when using a work computer or a friend’s computer. Never use public or unsecured networks to file your returns or access your financial information.
Keep your computer’s operating system updated to take advantage of built-in security features.
Use data wiping software to erase all your data before disposing of your computer, fax machine, or other electronics that might contain your personal information.
3. Know the Warning Signs
Protecting yourself from tax-related identity theft also means knowing the schemes identity thieves use and recognizing the warning signs that it could be happening to you.
Check the figures on your tax returns, financial records, and accounts to ascertain that everything is accurate. Review your social security statement for paid wages and tax returns filed under your name.
Contact the IRS immediately if you receive information about unreported income that you did not earn. Consider placing a fraud alert with one of the three credit bureaus to protect yourself if you believe someone is using your social security number for tax-related identity theft.
4. File Your Taxes Sooner
Identity thieves are on a higher alert during the tax season when everyone is rushing to avoid penalties for filing late. Such a rush places you at greater risk of handing your information to anyone who promises to pay your taxes in time.
You are also more likely to choose a tax preparer blindly without examining their data security or integrity, increasing the risk of handing your information over to identity thieves.
To prevent such incidents, file early and evaluate a tax preparer (including online tools) thoroughly before handing them your information.
Even though you could take steps to protect yourself from tax-related identity theft, there is still a chance that you could be a victim. It could happen through data breaches that expose millions of sensitive records, for exaple
Should you fall victim of tax-related identity theft: report to the IRS immediately, file a complaint with the FTC, place a fraud alert on your credit records, and notify your bank as well as other financial institutions.