3 Ways to Help Protect Against Income Tax Fraud
Good to Know
You just received a letter from the IRS that doesn’t make sense. It may not be cause for alarm, but consider this—the letter may be a red flag for the potential theft of your confidential income tax information. Cybercriminals can use this information to wreck your finances, for example by:
- Taking out a home equity loan on your home,
- Opening and using credit cards in your name, or
- Obtaining a government-issued driver’s license in your name but with their picture on it—there have even been cases where a criminal used such a license when being arrested.
This article will present common tax-related identity theft red flags, three simple yet powerful steps to reduce the risk of income tax-related identity theft and share available federal resources. We’ll begin with red flags.
Red Flags! Identity Theft Indicators
You may be a victim of identity theft if you receive a letter from the IRS:
- Inquiring about a tax return that you did not file,
- Rejecting your efiled return because of a duplicate Social Security Number,
- Informing you that an online account (that you did not create) was opened, or
- Enclosing a tax transcript that you did not request.
A word to the wise—if you receive any letter from the IRS about a matter that you did not initiate, you may the victim of tax fraud. Before we discuss what to do if you suspect identity theft, let’s emphasize what you can do to reduce the risk of that happening.
Three Ways to Reduce Tax-Related Identity Theft
- Get an IRS PIN—create a personal identification number with the IRS. The process generally requires less than 15 minutes and is considered by many to be particularly effective.
- Use multi-factor authentication (MFA) for your account with your online tax preparation provider. If your Amazon, bank, or social media account requires a one-time-use security code (usually texted to your phone) in addition to your username and password, then you’re already familiar with using MFA.
- Be skeptical of telephone calls, emails, or texts from the “IRS.” Receiving a phone call from the IRS is rare for most taxpayers and is never the first attempt to contact you. The first contact will always be through a letter. The IRS does not use emails or texts to contact taxpayers. A real IRS caller will provide their name and IRS ID number. A legitimate call from the IRS, although rare, will not demand immediate payment, ask for your credit card number, or threaten you with arrest. Neither will a real IRS agent attempt to bully you with revocation of your legal immigration status, cancellation of your driver’s license, or seizure of your assets.
Although these next suggestions are not part of the top 3, also take common-sense steps to shred any unneeded documents that have your social security information, including tax returns, W2s, and 1099s. Be sure to keep any retained paper documents and digital files safeguarded with physical locks or strong passwords and unique usernames (big hint—don’t use your email address as a username!).
Resources
If you receive any suspicious communication purporting to be from the IRS, call 800-829-1040 (be patient or be the first caller of the day, the lines are crowded as we near tax season) or use the Federal Trade Commission’s online resources to determine if it’s really the IRS.
Disclaimer
The information presented herein is provided purely for educational purposes and to raise awareness of these issues; it is not meant to provide and should not be used to provide legal, identity theft protection, investment, income tax, risk management, retirement, estate, or financial planning advice of any kind. An experienced and credentialed expert should be consulted before making decisions relating to the topics covered herein. There are variations, alternatives, and exceptions to this material that could not be covered within the scope of this blog.
