How to Protect Your Tax Refund From Being Stolen

With a few tips, you can avoid being scammed out of your money.

Identity theft isn’t limited to criminals opening credit cards and running up debt in your name — your tax return is also at risk. During the first eight months of 2017, over 189,000 people filed affidavits with the IRS stating they were the victims of identity theft. In the same time period, the Internal Revenue Service stopped an additional 443,000 false tax returns from wreaking havoc. Although the IRS works diligently to counteract fraudulent returns, you are the first line of defense in keeping your data and identity safe.

Don’t make the mistake of taking action only during tax season: Stay vigilant year-round to keep your personal information safe. Then when tax time comes, scammers won’t already have the information they need to file a fake tax return and gain access to your money. Do all you can to protect your tax refund from identity theft.

How to Prevent Tax Refund Fraud

Criminals make it their business to find ways to uncover and exploit your personal information — but you can make it your business to stop fraudulent tax returns from being filed in your name. Here are some steps you can take to protect your identity and your tax refund:

  1. Never respond to an email, text or social media contact claiming to be from the IRS. The IRS only initiates contact with taxpayers by postal mail. Forward any suspicious or fraudulent contacts to phishing@irs.gov.
  2. Don’t give your personal or financial information to anyone who calls claiming to be with the IRS. The caller might threaten arrest or deportation, but don’t be intimidated. Instead, report these calls to the IRS by calling 800-366-4484 or via the IRS Impersonation Scam Reporting website.
  3. Protect your personal identity information throughout the year. Always keep your Social Security number and other personal data well-protected to minimize the chances of unauthorized access. When online, use strong passwords and security software, and never click on suspicious links or downloads. Additionally, learn about phishing scams and how to avoid them.
  4. Check your credit report regularly to detect fraudulent activity. Although you are entitled to receive a free copy of each of your credit reports annually from AnnualCreditReport.com, you can also sign up for a free or premium credit-monitoring service. Sometimes credit card companies will provide this type of service to cardholders as a perk.
  5. Don’t ignore tax documents that you receive. A W-2 from an employer you didn’t work for can indicate that your identity might have been stolen.
  6. Don’t wait until the last minute. Instead, file your tax return as early as reasonably possible so that criminals can’t file one first, reports CBS. To help you file as early as possible, go over your prior year’s returns and make a list of all the documents you need to file and create a checklist. Also, keep your receipts throughout the year, so they’re available when you’re ready to file.
  7. Get an identity protection pin. An identity protection pin — aka an IP PIN — is a six-digit number assigned to you by the IRS to prevent fraudsters from using your Social Security number on a fake tax return. To get an IP PIN, you’ll need to determine your eligibility:
    • You must have received an IRS letter inviting you to opt-in OR
    • You must have filed a tax return last year with an address in California, Delaware, District of Columbia, Florida, Georgia, Illinois, Maryland, Michigan, Nevada or Rhode Island.
    • To get your IP pin, you’ll have to pass the IRS’ identity verification secure access process.

Learn: How to Report Tax Fraud

How to Recover From a Stolen Tax Refund

It’s important to take swift action if you are a victim of tax identity theft. Follow these steps to report tax fraud:

  1. Complete IRS Form 14039 Identity Theft Affidavit to report that your tax return was rejected because there was a duplicate tax return filed using your Social Security number.
  2. Respond immediately to any notice you receive from the IRS in response to your affidavit. You can also call the agency at 800-908-4490 for specialized identity theft assistance.
  3. Contact all of your financial institutions to alert them that you’ve been a victim of identity theft.
  4. File a complaint with the Federal Trade Commission at identitytheft.gov to report identity theft.
  5. Put a fraud alert on each of your credit records at the three major credit bureaus:
    • Experian: 800-525-6285
    • Equifax: 800-525-6285
    • TransUnion: 800-680-7289
  6. Consider filing a credit security freeze with each major credit bureau. A credit freeze restricts access to your credit report unless you authorize it with a secure PIN. This helps prevent identity thieves from being approved for credit in your name.

Click to see the No. 1 thing Americans do with their tax refund.

More on Taxes

Cynthia Measom contributed to the reporting for this article. 

About the Author

Michael Keenan is a writer based in the Kansas City area, specializing in personal finance, taxation, and business topics. He has been writing since 2009 and has been published by Quicken, TurboTax and The Motley Fool.