Tax season can feel like a whirlwind—gathering documents, meeting deadlines, and coordinating with your CPA. Amid the busyness, there’s another serious concern: scams and identity theft. Scammers take advantage of this time to strike, often with devastating consequences. Understanding how to recognize scams, safeguard your personal information, and respond effectively can help protect you from becoming a victim.
What Is Tax Identity Theft & How Can You Prevent It?
Imagine this: You sit down to file your taxes, but the IRS rejects your return because one has already been filed under your Social Security number (SSN). This is tax identity theft. Scammers use personal information—your SSN, name, and birth date—to file fraudulent returns and claim refunds. Most people don't realize they've been targeted until they try to file or receive an unexpected notice from the IRS.
How Scammers Steal Your Tax Information
- Pretending to be IRS representatives via email or phone
- Sending phishing emails
- Stealing W-2 forms from mailboxes
- Accessing sensitive details over unsecured Wi-Fi
Steps to Take If You're a Victim of Tax Identity Theft
If you suspect tax identity theft, act quickly. Here's what to do:
Notify the Authorities:
- File a complaint with the Federal Trade Commission (FTC).
- Contact the Social Security Administration (SSA).
- Call the IRS Identity Protection Specialized Unit at: 800.908.4490.
Submit IRS Form 14039:
- This Identity Theft Affidavit notifies the IRS that your SSN has been compromised.
Apply for an Identity Protection PIN (IP PIN):
- This six-digit PIN is issued by the IRS and must be included with all future tax filings.
Contact a Major Credit Bureau:
- Request a fraud alert on your credit report with Experian, TransUnion, or Equifax.
Consider Credit Monitoring Services:
- These services can alert you to new credit activity and assist in identity theft recovery.
Biggest Tax Scams to Watch Out for This Year
Scammers don't stop at identity theft. Here are two big scams to watch out for:
Beware of "Ghost" Tax Preparers: Red Flags & How to Avoid Them
These fraudulent preparers refuse to sign your return, leaving you vulnerable to errors or fraud.
Red Flags:
- They don't provide a Preparer Tax Identification Number (PTIN).
- They promise unusually large refunds.
- They require cash payments or have your refund deposited into their account.
Pro Tip: Verify your tax preparer's credentials using the IRS online database.
IRS Scams: How to Identify Fake Calls and Emails
Scammers posing as IRS agents may demand immediate payment or threaten arrest.
What the IRS Will Never Do:
- Demand payment without letting you appeal.
- Call to request payment via prepaid debit cards or gift cards.
- Threaten law enforcement action.
If you receive a suspicious call or email, it's likely a scam. Report it to the IRS via their Report a Tax Scam or Fraud page.
How to Keep Your Tax Information Safe from Scammers
Want to stay ahead of scammers? Here's how:
- File Early: Beat scammers to the punch by filing your taxes as soon as possible.
- Secure Your SSN: Share it only when necessary and only with trusted entities.
- Avoid Public Wi-Fi:Don't access sensitive information on unsecured networks.
- Enable an IP PIN: This extra layer of protection makes it harder for scammers to file a return in your name.
Stay Alert: Identity Theft Risks Beyond Tax Season
While scams peak during tax season, they can happen at any time. Monitor your credit, use strong passwords, and stay cautious with your personal information.
Need help navigating financial matters? From creating a financial plan to managing your investments, we're here to help. Schedule an introductory meeting to learn how we can support your goals.
Tom Hine is aCERTIFIED FINANCIAL PLANNER®professionaland owner of Capital Wealth Management. He works with individuals and families on financial planning, retirement strategies, and investment management. With offices in Glastonbury and Wilton, CT, Tom serves clients across Connecticut and throughout the U.S. Connect with Tom