Tax-related identity theft is easy, lucrative and low-risk...and the thief often has cash in hand before the crime has even been detected. It happens when crooks use your Social Security number to file taxes before you and steal your refund. The Federal Trade Commission's Consumer Sentinel Report showed a 43 percent growth in this type of crime, and the IRS reported a 60 percent increase in suspected tax return fraud for the 2012 tax season.
Thieves use two common methods for tax-related identity fraud. Under the first option, the thief fraudulently files a tax return in the victim’s name and claims the refund. Victims usually find out when they receive a notice from the IRS that more than one tax return was filed in their name.
In another scenario, identity thieves get paid for work while using the victim's identity on tax forms. In this instance, the thief would owe money at tax time, and the victim would be stuck with the bill. Victims discover the problem when their tax forms indicate they received wages from an unknown employer for work they have not completed.
Follow the tips below to protect yourself from this quickly spreading threat:
- Never give out your Social Security number unless you have a very good reason for doing so. This is the key piece of information that identity thieves need to file fraudulent tax returns.
- Store tax forms in a secure location such as a safe or safe-deposit box. Avoid saving forms on a computer (if you must, make sure they are password protected and kept on an encrypted drive).
- Use a reputable tax preparer or tax preparation software. Many tax-related identity theft schemes involve criminals falsely identifying themselves as tax professionals.
- Double check your tax forms as soon as you receive them.
- Promptly retrieve W-2s, 1099s or other tax forms that come by mail.
- Opt for direct deposit of your return. You'll get it faster, giving criminals less time to file and benefit from fraudulent returns.
This article has been provided courtesy of IDentity Theft 911, a partner for the IBA (Iowa Bankers Association) Bank Club Program.