According to the IRS, the average non-business taxpayer spends eight hours preparing his tax return. According to the most recent survey by the National Society of Accountants, the average cost to have a tax professional prepare a Form 1040 and state return without itemized deductions is $159. That’s a lot of time and money to invest in something you probably don’t want to do in the first place. Yet, there’s often a reward for your investment, as many taxpayers get some of their hard-earned money back with a tax refund.
Stealing your Social Security number is often the hardest task for a tax refund scammer. Once that’s achieved, all he has to do is file a tax return in your name and have it sent to a different address or bank account — and your hard-earned money is gone forever. Here’s how you can prevent tax fraud from happening to you.
6 Ways to Protect Yourself From Tax Refund Scams
The following are some tips to prevent tax refund fraud and identify theft — which often leads to tax refund fraud — from happening to you.
1. Guard Your Social Security Number
Only give your SSN if you’ve initiated a call or are otherwise confident in who you’re dealing with. Also, ask why a business needs your SSN before handing it over. If it is not absolutely required or you are otherwise uncertain of the requester’s legitimacy, don’t share it.
2. Monitor Your Credit Report
The IRS recommends checking your credit report every 12 months, reviewing for any activity that is out of place with your financial records or purchases.
3. Protect Your Computer
Protect your computer with anti-spam and anti-virus software. Keep security patches up-to-date and use a firewall. Change passwords regularly in case a thief steals your existing passwords.
The IRS does not request personal or financial information via any electronic means. If you receive an “IRS” email asking for sensitive information, forward it to email@example.com to report the unsolicited email.
4. Secure Physical Files
Anything that has your SSN on it should be stored in a secure location, including tax records from past years. Examples of secure locations include safes and locked drawers. Shred all documents you no longer need.
5. Watch Your Wallet or Purse
Keep your wallet or purse in sight at all times, even at work. Or, keep it in a secure location, such as a locked desk drawer or gym locker.
6. Protect Your Identity When Traveling
Have your mail held at your local post office or have a trusted family member, friend or neighbor regularly gather it while you’re away. Also, while traveling — or anytime you leave the house for that matter — only take your Social Security card with you if you need it. Keep any sensitive materials, including your Social Security card, locked in a hotel safe when you are away from your room.
How Tax Refund Fraud Occurs
Tax fraud can be the result of identity theft, which comes in various forms. According to the U.S. Department of Justice, these include the following:
- Dumpster diving: Going through your garbage or recycle bins for statements, personal documents, etc.
- Shoulder surfing: Spying on you to get personal access information as you use an ATM, computer or another electronic device
- Mail interception: Stealing your mail
- Phishing: A false website or scam email posing as something legitimate, intended to lure personal information from you
- Malware: A computer program that you unwittingly download, which then steals your information
- Physical theft: Purse- or wallet-snatching
A thief can get his hands on your stolen SSN and other personal information stealthily by practicing one of the malicious crimes mentioned. It’s critical you keep your personal information private.
Tax Refund Scam: See How Identity Thieves Steal Tax Refunds
Some taxpayers’ identities are being stolen and used for tax fraud. Watch this video to learn more.
What to Do If You’re the Victim of a Tax Fraud Scam
If someone steals your personal information, contact the IRS Identity Protection Specialized Unit at 800-908-4490. If the thief has already stolen your tax refund or you’ve become a victim of a tax scam, call the IRS at 800-829-0433.
Other organizations you might wish to contact include:
- U.S. Postal Service
- Social Security Administration
- Credit reporting companies
- Financial institutions you do business with
Tax refund scams are just one more way that an identity thief can use your personal information to steal your money. By following the tips in this guide, however, you can minimize your vulnerability to tax refund fraud and protect yourself — and your tax refund — from theft.