Don’t Fall Victim to Tax Related Identity Theft

We’re pleased to provide you with this guest post by personal finance expert Michael German.

Last year, identity theft overtook credit card fraud as the most common type of fraud perpetrated in the U.S.  One type of identity theft that is growing significantly is tax related identity theft, which affected more than 350,000 taxpayers last year.

KNOW THE SCAMS

 
Tax related identity theft has seen an increase of over 300% in the last five years. With more taxpayers filing their returns over the internet, and the IRS under rigid fiscal restraints to combat the crime, the trend shows no sign of slowing.


Employment Identity Theft

There are several ways tax related identity theft scams are executed. The most common of these is employment identity theft. In this scam, your identity is stolen and used for procuring work. Working under your social security number, the thief earns income that you know nothing about and will not put on your tax return. Therefore, you will most likely receive a letter from the IRS stating that you have under-reported your earned income.

Account Take Over Scams


Account takeover scams are another way in which thieves can use your identity for the purpose of stealing your tax refund. Armed with your personal information, they file a tax report, usually before you will, and collect your tax refund. If you receive a letter from the IRS stating that you’ve already filed when filing your yearly taxes, it is likely you have been a victim of this type of theft.

Late Payment Scams

There are also late payment scams where thieves will contact you representing themselves as collection agents looking to collect fees on behalf of the IRS. Internet phishing scams abound where crooks, again posing as the IRS, will try to frighten you into sharing your personal information. In truth, the Internal Revenue Service will never contact a taxpayer by email, unless an ongoing dialog already exists between a taxpayer and an agent.   

HOW YOU CAN PROTECT YOURSELF

There are some precautionary measures you can take to lower the chances that you will fall victim to one of these tax related scams. Filing early definitely works to your advantage. Many of these scams depend on the fact that the thieves get to the IRS before you do. By the time you file, the crime has already been committed. So you must beat them to the punch.

Always secure your computer; do not dismiss the role your computer can play in identity theft simply because you do not file online. Computers can be hacked in a great many ways so always try to limit the amount of personal information your computer holds. Needless to say, always shred your mail. All a thief needs is one copy of your W-2 form to begin the scam.  

IF YOU FALL VICTIM, TAKE ACTION


Even with all precautions in place, it still is possible that you could become enmeshed in some form of identity theft. If you should fall victim, always contact your local law enforcement agencies, as well as one of the three nationwide consumer reporting companies.

You need only contact one as they will pass along the alert to the others.  In a case of tax related identity theft, you can find a great deal of information on the IRS website. Contact them by phone, or you can visit an IRS Taxpayer Assistance Center (TAC) near your home.


Photo Credit: John-Morgan (Flickr)

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Michael German is an expert in the field of personal finance and a graduate of Columbia University. His lengthy tenure includes literary work with The New York Times international weekly edition, where he reports on global economy and consumer trends. As a writer and researcher in personal finance, Michael is also a contributor to several online and print publications.

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