March 27, 2013

Tax fraud looks a lot like regular financial fraud it costs you money and causes you a lot of frustration.

The good news is that if you’re taking steps to protect yourself against identity theft and credit card fraud, you’re on the right track to preventing your tax refund, personal information and money from falling into the wrong hands.

But there’s more you should know to prevent yourself from becoming a victim this tax season. Read on for the I.R.S.’s four top tax scams targeting people like you, how to prevent them and what to do if you’ve already become a target.

Identity Theft

Identity theft in the tax world is a little bit different than your average card scam, but can be just as frustrating. It happens in a couple ways:

  • A thief uses your personal information to file a tax return, and then has your refund sent to him or her.
  • Someone uses your Social Security number to get a job, and when the employer sends its withheld taxes to the I.R.S., the I.R.S. thinks you have not been claiming all your income on your tax return.

The first clue that this has happened might be when the I.R.S. informs you by letter that two returns have been filed in your name (yet another reason to file early) or that you didn’t claim all the income that you made at a restaurant in Texas 400 miles away from where you live.

Because of the rise in tax identity theft, the I.R.S. has ramped up its effort to combat it, putting in new processes for handling tax returns and new compliance filters to detect fraud, and aggressively investigating identity thieves. It’s also piloting an initiative that requires taxpayers who have already been targeted to go through a supplementary verification process.

Still, identity thieves will continue to find workarounds, so stay vigilant with the following tips:

How to Prevent It

If your wallet is lost or stolen, or you’ve already been affected by other forms of identity theft, contact the I.R.S. Identity Protection Specialized Unit at 1-800-908-4490. Other steps to protect yourself include:

  • Not carrying your Social Security card or any document(s) with your S.S.N. on it.
  • Only giving your S.S.N. to businesses when required.
  • Protecting your financial information.
  • Checking your credit report every four months.
  • Securing personal information in your home.
  • Protecting your personal computers and mobile devices by using firewalls, anti-spam/virus software, updating security patches and changing passwords for internet accounts on a regular basis.
  • Not giving personal information over the phone, through the mail or on the internet unless you have initiated the contact or you are sure you know who you are dealing with.

If This Has Happened to You

If you receive a letter from the I.R.S. telling you that you filed two refunds, or that you owe taxes or are due a refund from a year you did not file, respond immediately to the name, address or phone number on the I.R.S. notice. If you suspect the notice is not from the I.R.S., contact the I.R.S. Identity Protection Specialized Unit, toll-free at 1-800-908-4490. You’ll be asked to file a police report and fill out an identity theft affidavit. From there, the I.R.S. will work with you to resolve the issue.