Pardon me, is that my tax refund in your pocket?

Published on May 9, 2024 | Webster Bank

How to protect yourself against tax-related fraud

Imagine filing your tax return only to find that a stranger beat you to it. Sound crazy? It’s actually an increasingly common identity theft tactic. This “seasonal” scam has picked up steam in recent years; unfortunately, peak season is right now. In fact, according to the IRS, in the 2023 filing season alone, more than 1 million tax returns were flagged for potential identity fraud, with more than $6 billion in refunds requiring additional review.

How can this happen?

Simple. Identity thieves steal your Social Security number (SSN) and use it to file a phony tax return online—usually early in the year before you’ve had a chance to file yourself. After you do file, you get a notice from the IRS letting you know there’s a “problem” with your return, such as:

• A tax return was already filed using your SSN.
• You owe additional tax or have had collection actions taken against you for a year you did not file a tax return.
• IRS records indicate you received wages from an employer unknown to you.

Now, you have a significant financial and tax mess that can take a long time to straighten out. So what’s the good news? You can take steps to protect yourself against this kind of online tax fraud.

Tax Filers: Become your own fraud security guard in 4 easy steps

1) Protect your computer.

The internet is the gateway to online identity theft and fraud, so be sure you have good security software. Consider installing a firewall, virus and malware protections, and file encryption for sensitive data. And, of course, always use strong passwords and change them often.

2) Learn the latest fraud tactics.

Identity thieves are incredibly clever, so staying one step ahead is essential – especially at tax time. Be on the lookout for emails or texts from the IRS. The IRS does NOT use email, texts, or social media to request taxpayer information. And they will never ask for your PIN or credit card information.

Another tactic to be aware of is email links and attachments to launch viruses and other malware. As a rule, you should only open attachments if you know what it is and who sent it.

3) Keep your SSN under wraps.

Your SSN is a hot commodity among identity thieves, so protect it smartly. Don’t carry your Social Security card around with you. And don’t give a business your SSN just because it asks— such as a retailer, pharmacy, or car dealership. Make sure it’s necessary.

It’s also a good idea to check your credit report and Social Security earnings statement every year to ensure there’s been no unusual activity.

4) Safeguard your accounts.

Avoid using public Wi-Fi for banking or sensitive tasks as it’s often insecure and leaves you vulnerable to hackers. If you must log in to public Wi-Fi, consider using a trusted virtual private network (VPN) service to protect your connection. Also, be sure to log out of sensitive sites when you’re not using them to prevent other users from accessing your personal information.

At home, make sure to verify the security and legitimacy of the website before sharing personal and financial information. For example, start by looking out for the padlock icon and confirm the URL starts with https, signaling a secure, encrypted connection. However, https alone doesn’t guarantee the website’s authenticity. A way to check the website’s legitimacy is by ensuring that the certificate used for the connection is for the correct site.

Tax Filers Aren’t the Only Target: Preparers Must Also Stay Vigilant

While tax filers have typically been the prey of choice for fraudsters during tax return season, more are also turning their sights on unsuspecting tax professionals. Posing as potential “new clients,” scammers are now actively targeting accounting groups and tax preparation firms with phishing emails and malware designed to compromise sensitive client data housed on their systems. When successful, these attacks can enable fraudsters to impersonate legitimate tax filers and prepare authentic-looking tax returns to collect a refund – or worse, steal unknowing clients’ identities.

Fortunately, the IRS has curated a variety of resources to get help from the IRS and law enforcement in case of a data breach:

• IRS Stakeholder Liaison – For tax professionals who are victims, the IRS recommends quickly reporting data theft to the local Stakeholder Liaison representative immediately. Liaisons will notify IRS Criminal Investigation and others within the agency on the tax professional’s behalf. Speed is critical. If reported quickly, the IRS can take steps to block fraudulent returns in clients’ names and take other steps to protect tax professionals and their clients.
• The Federal Bureau of Investigation (consult your local office).
• The U.S. Secret Service (consult your local office, if directed).
• Your local police department (to file a police report on the data breach).
• The Federation of Tax Administrators – Tax professionals can reach this special “report a data breach” web page for victim reporting guidance to the states.
• Your State Attorney General – Most states require the state attorney general to be notified of data breaches.

If you see something, say something.

Now that tax season is upon us, it’s more important to watch for potential scams. If you receive a suspicious email, report it to [email protected].

If you suspect a phone, fax, or mail scam, call 1-800-366-4484. And if someone is attempting to impersonate an IRS agent, report it to the Treasury Inspector General for Tax Administration at www.ftc.gov.

For more tips on how to protect against tax fraud, visit identitytheft.gov.

SOURCES:

IRS, Security Summit partners warn of surge in “new client” scams aimed at tax pros as 2024 filing season approaches

More than 1M tax returns flagged for potential identity fraud: IRS