Tax-Related Identity Theft 101
This post was originally published on 3/11/22 and updated on 3/8/23
Tax season isn’t anyone’s favorite time of the year, except possibly your local CPA – and fraudsters! With so much sensitive data being used during tax time– your social security number, driver’s license number, and bank routing information, to name a few –it’s a good time to tighten the safety of your personal information. Even in the midst of the pressure to meet obligations to the IRS, you need to stay vigilant. Scammers are waiting to take advantage of individuals who are so focused on meeting tax deadlines that they neglect to take the necessary precautions against fraud and identity theft.
Tax time is prime time for thieves to steal tax refunds or impersonate the IRS and trick you into giving away sensitive information that could lead to other types of fraud or theft. So, how does tax-related identity theft happen– and how can you prevent it?
What Is Tax-Related ID Theft?
According to the Federal Trade Commission (FTC), employment or tax-related fraud has continued to rank in the top 10 most common types of identity fraud reported for the past five years. Tax-related identity theft occurs when a consumer’s identity is misused to file a tax return. In other words, the scammer reaps the benefits of someone else’s hard work, and the tax refund (if any) is paid to them instead of the consumer.
Other scammers pose as IRS representatives or tax preparers in order to steal personal information, which can then be used to take out loans, open credit cards, or even file for unemployment benefits in the victim’s name.
How Can You Protect Yourself?
- File taxes early. The sooner you file your taxes, the sooner the window of opportunity closes for a scammer to steal your identity or inflict tax-related fraud.
- Don’t use public Wi-Fi. Public Wi-Fi is notoriously easy to hijack (either by hacking into your computer directly or spoofing a similar Wi-Fi network name to trick you into logging into the scammer’s network). If you have to use public Wi-Fi, make sure you utilize a VPN to hide your computer from potential scammers.
- Don’t confirm personal information by email or over the phone. The only exception to the rule is if you are working personally with a CPA, and even then remain extra vigilant. Double check that the phone number or email address from which your accountant is reaching out matches the contact information on their website or business card before you respond.
- Strengthen your passwords. When transmitting tax-related information or setting up accounts through the IRS or websites like TurboTax, make sure you use strong passwords and 2-Factor authentication whenever possible.
- Get an Identity Protection PIN. The IRS allows you to set up an Identity Protection PIN (IP PIN), a six-digit number that prevents someone else from filing a tax return using your Social Security number or Individual Taxpayer Identification Number. Think of it as an extra padlock on your tax-related information!
Watch for Warning Signs.
No matter how careful you are, there’s always a chance that your personal information may fall into the wrong hands. Watch for warning signs that you’ve been hacked, including any notices from the IRS regarding income from a job you did not have or benefits (such as unemployment or disability) for which you did not apply. To help you keep watch, identity protection services like AAA Identity Champion operate as an early warning system that prompts you to take action and minimize damage.
You should always be vigilant in protecting your personal information, but it never hurts to have a little extra help– especially during tax season. AAA Identity Champion can help minimize the risk and damage of identity theft through dark web monitoring and identity theft insurance. If you’re already a AAA member, the Basic plan is available at no extra cost to you! Explore our plans to decide which is the best fit.