Want to Avoid Tax Fraud? File Early
While the deadline for filing taxes is April 18 this year and many Americans may not want to think about taxes so close to the new year, experts are recommending filing them early for something often ignored — avoiding fraud.
But why does filing your taxes early protect against fraud?
Tom Wheelwright, CPA and author of Tax-Free Wealth, told GOBankingRates, that “if someone has stolen your identity and files a tax return in your name to claim a refund, you will run into trouble when you submit your actual information. You want to file before a fraudulent person files. If they file first, it can take a year or more to rectify with the IRS.”
Indeed, the Justice Department notes on its website that typically, Stolen Identity Refund Fraud (SIRF) perpetrators file the false returns electronically, early in the tax filing season so that the IRS receives the false SIRF return before legitimate taxpayers have time to file their returns.
“The SIRF perpetrators arrange to have the refunds electronically transferred to debit cards or delivered to addresses where they can steal the refund out of the mail,” according to the Department.
If someone has stolen your identity and files a tax return in your name to claim a refund, you will run into trouble when you submit your actual information, and it’s your responsibility to prove to the IRS that the return filed in your name was fraudulent and give them the correct information. The agency will investigate, which will delay getting the money you’re owed, Wheelwright said.
He added that people most likely to fall victim to this type of fraud are people who claim earned income credit or child tax credit, and also, anyone who has had their data compromised.
“You will need to prove to the IRS that the return filed in your name was fraudulent and give them the correct information. They will need to investigate, which will delay getting the money you’re owed,” he said.
“Get everything together now, so as soon as you get your W-2 and 1099s, you can file,” he said.
The IRS says that if you suspect you are a victim of identity theft, continue to pay your taxes and file your tax return, even if you must file a paper return.
In addition, you may not know you’re a victim of identity theft until you’re notified by the IRS of a possible issue with your return.
Some of the instances the IRS recommends to be alert to for possible tax-related identity theft include:
- You get a letter from the IRS inquiring about a suspicious tax return that you did not file.
- You can’t e-file your tax return because of a duplicate Social Security number.
- You get an IRS notice that an online account has been created in your name.
- You get an IRS notice that your existing online account has been accessed or disabled when you took no action.
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