We have all heard about the prevalence of identity theft in today’s world but there is a new type of theft that is getting our attention these days, the filing of fraudulent tax returns. According to the IRS, tax refund fraud in 2014 topped out at $6.5 billion and they have projected that number will reach $21 billion in 2016. Tax refund fraud has jumped to the front of the line in consumer fraud, accounting for 32.8% of overall complaints to the Federal Trade Commission.
To file a tax return all a scammer needs is three items, (1) your name, (2) your social security number and (3) your date of birth. With those three items a scammer is able to file a tax return and claim a refund using your personal information. The IRS issues refunds to taxpayers within 30 days of filing; therefore a scammer could get a refund before you have even attempted to file your return. There are some obvious red flags that the IRS looks for such as whether multiple checks were sent to the same address or deposited to the same account. The IRS has been upfront with taxpayers about the budgetary and legal constraints that they face in trying to catch fraudulently filed returns and the perpetrators.
To help taxpayers who have been a victim of a fraudulent tax filing, the IRS will issue an identity protection (IP) PIN to be utilized when electronically filing future returns. Unfortunately, PINS are currently only available for taxpayers who have already been victims of fraud. This program is only available on the federal level at this point, if you have experienced a fraudulent filing of your California tax return as well you can no longer electronically file the return and must paper file until the issue is resolved.
What can you do to protect yourself?
One of the many ways that scammers are getting personal information from taxpayers is through phone calls and emails claiming to be from the IRS. The IRS will never call or email you requesting personal information. If you get a phone call or email from someone claiming to be from the IRS ignore it, do not give out any personal information to these “agents”. Be careful with your personal information. If you are doing online banking and investing be sure that your anti-virus software is always up to date and you are on a secure network when you access these sites. For more tips about safeguarding your personal information or if you think that you might have been a victim of a fraudulently filed tax return contact your LSL Advisor.
