Want to Avoid Tax Fraud? File Early

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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.

See: Why You Should Line Up a Tax Preparer Now — and What Paperwork You’ll Need
Find: 10 Retirement Tax Surprises To Prepare For

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.

Save for Your Future

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.

Save for Your Future

See: Social Security: What Are Maximum Taxable Earnings, and What Are They For 2022?
Find: Child Tax Credit: I Received Money, But Don’t Usually Submit a Return — Do I Need to File Taxes This Year?

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.

More From GOBankingRates

About the Author

Yaël Bizouati-Kennedy is a former full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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