The Rising Issue of Tax-Related Identity Theft: 5 Ways to Protect Yourself

Tax-related identity theft has become a growing concern in recent years. While the IRS has made efforts to improve taxpayer service and technology, victims of tax-related identity theft often face “unconscionable delays” in resolving their cases, as noted by the taxpayer advocate. In this blog, we will explore the rising issue of tax-related identity theft, its implications for taxpayers, and 5 essential ways you can protect yourself from falling victim to this pervasive crime.

The Scope of Tax-Related Identity Theft

Identity theft occurs when someone uses your personal information, such as your Social Security number, to fraudulently file tax returns and claim refunds in your name. Tax-related identity theft has been on the rise, with thousands of cases reported each year. This form of identity theft can have serious ramifications for individuals, including delayed refunds, damaged credit, and the need to resolve complex identity theft issues with the IRS.

Tax-related identity theft can occur through various means, such as phishing scams, data breaches, and even stolen mail. Scammers are becoming increasingly sophisticated in their methods, making it crucial for taxpayers to be vigilant and take proactive steps to protect their personal information.

The Implications for Taxpayers

Victims of tax-related identity theft often face a number of challenges in resolving their cases. The taxpayer advocate has identified “unconscionable delays” in the IRS’s handling of identity theft cases, leaving victims in a state of limbo for extended periods of time. This can lead to financial hardships, as individuals may be unable to receive their rightful refunds or clear their names from fraudulent tax returns.

Moreover, tax-related identity theft can have long-lasting effects on a victim’s credit score. Once fraudulent activity has been detected, victims must work with credit reporting agencies to remove any negative marks on their credit reports. This process can be time-consuming and require significant documentation to prove the fraudulent nature of the activity.

Protecting Yourself from Tax-Related Identity Theft

1. Safeguard Your Personal Information

One of the most effective ways to protect yourself from tax-related identity theft is to safeguard your personal information. This includes keeping your Social Security number, bank account information, and other sensitive data secure. Be cautious about sharing personal information online or over the phone, especially if you are not familiar with the party requesting the information. It is also advisable to lock and store physical documents containing sensitive information in a secure location.

Regularly reviewing your financial statements and credit reports can help you identify any unauthorized activity and detect potential signs of identity theft. Monitoring your accounts and credit reports can provide early detection of fraudulent activity, allowing you to take immediate action.

3. Be Cautious of Phishing Attempts

Phishing scams are a common method used by identity thieves to obtain personal information. These scams often involve emails or phone calls that appear to be from legitimate organizations, such as the IRS or financial institutions. They may request personal information or prompt you to click on a link or download a file containing malware.

To protect yourself, be cautious when responding to unsolicited requests for personal information. The IRS and other legitimate organizations will never contact you via email or phone to request sensitive information. If you receive a suspicious email or phone call, do not provide any personal information. Instead, independently verify the legitimacy of the request by contacting the organization directly through a verified contact number or website.

4. File Your Taxes Early

Filing your taxes early can help minimize the risk of tax-related identity theft. By filing early, you reduce the window of opportunity for identity thieves to file fraudulent returns in your name. If an identity thief attempts to file a return using your Social Security number, they will be met with an error message indicating that a return has already been filed under that number.

If you are currently unable to file your taxes early, consider filing for an extension. This will give you additional time to gather and organize your documentation, ensuring that your tax return is accurate and complete.

5. Use Strong and Unique Passwords

Using strong and unique passwords for your online accounts is an essential step in protecting your personal information from cybercriminals. Avoid using easily guessable passwords, such as your date of birth or “123456.” Instead, use a combination of upper and lowercase letters, numbers, and special characters. It is also important to use a different password for each online account to minimize the impact of a potential data breach.

Consider using a reputable password manager to store and generate unique passwords for your various accounts. This will help ensure that you are consistently using strong passwords and reduce the risk of unauthorized access to your accounts.

Hot Take Away

Tax-related identity theft is a significant concern for taxpayers, with victims often facing “unconscionable delays” in resolving their cases. It is crucial to take proactive steps to protect yourself from falling victim to this pervasive crime. Safeguarding your personal information, being cautious of phishing attempts, filing your taxes early, and using strong and unique passwords are essential strategies to mitigate the risk of tax-related identity theft. By staying vigilant and implementing these preventive measures, you can safeguard your personal information and minimize the potential impact of tax-related identity theft.

Now that you’ve learned more about this subject, feel free to read this recent news article on the topic: Victims of tax identity theft face ‘unconscionable’ IRS delays, taxpayer advocate finds