File Taxes Early to Prevent ID Theft
The Internal Revenue Service (IRS) pays out billions in refunds to identity thieves, according to a report from the General Accounting Office. Incidences of tax identity theft were drastically reduced in 2016 and 2017 from prior years, but it's important to take action if it appears someone else used your information to file a fake tax return.
Identity thieves take legitimate taxpayers’ Social Security numbers so they can file false tax returns and cash in on refund checks. They often strike early in the tax season, filing returns before their victims.
Often, taxpayers do not find out they are victims of identity theft until they attempt to file their own tax returns online. Other taxpayers are notified of the theft through notices from the IRS.
As scary as the statistics are, there are some things you can do to help prevent identity theft as you file your taxes.
How to Prevent Taxpayer ID Theft
The IRS has pledged to increase prevention efforts, but it is hard to catch or prevent identity theft on the spot. Since you can’t count on the regulating organization to protect you, you’re going to have to protect yourself.
Filing your taxes early is the best way to prevent tax identity theft because the IRS allows only one tax return per Social Security number per year.
The first sign of theft may not be a missing refund check. You can monitor your credit report every four months at AnnualCreditReport.com. To use this method, choose one credit reporting bureau every four months, rather than ordering all three at once. You also can monitor suspicious activity once a year via My Social Security.
What to Do if You are a Victim
If you are a victim of identity theft, check out the IRS’s step-by-step guide, which includes reporting the crime to various local and federal agencies and filing a paper copy of your return with Form 14039.
As you go through the process of reclaiming your identity, make copies of your tax return and store them in a safe place. Be sure to keep the name of any representatives you talk to as you mend the situation with your records, along with copies of any letters or emails you send.
Identity theft is scary and, unfortunately, rampant. Arm yourself with knowledge to prevent ID theft and react quickly should the worst happen this tax season.
[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]