Tax season is underway and that means an uptick in tax-related scams. One particularly pernicious form of fraud is tax identity theft. Tax-related identity theft happens when someone uses sensitive personal information (like your Social Security number) and files a fraudulent tax return in your name to collect a refund. According to recent statistics, scammers filed over 5 million returns in 2013 using stolen information, costing the IRS $5.8 billion in fraudulent refunds.
Unfortunately, filing a false tax return isn’t difficult. All you need is a name, Social Security number (SSN), and date of birth (usually stolen from sources outside the IRS). Most victims don’t realize anything is amiss until they file their taxes and receive notification that a return has already been filed in their name. Fortunately, there are some common-sense steps you can take to protect yourself from identity theft.
How to Protect Yourself from Identity Theft
- Remember that scams involving people impersonating the IRS are on the rise, especially this time of year. The IRS never asks for personal information by phone, email, text, or social media or threatens arrest for nonpayment. IRS notices will always arrive by mail, and anyone demanding immediate payment over the phone is a scammer. If you receive an unsolicited call and think you might owe federal taxes, hang up and call the IRS directly at 1-800-829-1040.
- Be careful about giving out your SSN since it is the most commonly used piece of data to commit identity theft. If you are filling out paperwork that asks for your SSN, confirm whether it is actually necessary and ask about security precautions.
- Never give out information in response to unsolicited calls, emails, letters, or social media messages. Don’t click on links in emails purporting to be from the IRS or a financial institution or enter information into any website linked from that email. Always visit official websites directly and call an official number to verify the legitimacy of any request.
- Follow smart computer practices like creating strong, unique passwords for each account and website you use. Purchase anti-virus and firewall software for your computer and install regular updates. When you discard an old computer, get an expert to wipe the hard drive and remove all of your private data.
- Regularly shred documents like bills and financial statements, tax returns older than seven years, old checkbooks, receipts, credit card offers, paycheck stubs, insurance statements, expired credit cards, and any other paperwork that contains account numbers or personal information. A lot of identity theft happens when thieves gain access to confidential data in your trash, car, or house.
Identity Theft Warning Signs
- The IRS notifies you that a tax return has already been filed in your name or that you received income from an employer you don’t recognize.
- Debt collectors call about debts you don’t owe.
- You find unfamiliar accounts on your credit report or notice unusual charges on account statements.
- You are billed for medical services you did not receive or are notified by your insurance company that you have reached your benefit limit.
What to Do if Your Identity Has Been Stolen
If you have been the victim of identity theft (i.e. scammers may have used your SSN or other confidential information to commit fraud), it’s important to act quickly to avoid damage to your financial life. Here’s what to do:
- File a report with your local police department.
- If you believe that you have been the victim of tax-related fraud, call the IRS at 1-800-366-4484 and fill out a report at www.treasury.gov/tigta.
- Notify the fraud departments of the three major credit agencies:
- Equifax: 1-800-525-6285
- Experian: 1-888-397-3742
- TransUnion: 1-800-680-7289
- Order a copy of your credit report and review all accounts and transactions for fraud. The only place to receive a free credit report from all three agencies is at www.annualcreditreport.com. Gather information to dispute any fraudulent information.
- Notify the Social Security Administration of the possible theft of your SSN by calling the fraud hotline at 1-800-269-0271.
How We Can Help
One of the benefits of having a financial professional in your corner is that you don’t have to fight financial fraud alone. Incidences of identity theft and tax-related fraud are on the rise, and we’re here to help our clients protect themselves. If you have questions about identity theft or tax-related scams, please contact our office at 913.814.3800.
Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Searcy Financial Services, Inc.
The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.
Originally published on April 7, 2016 by Searcy Financial Services, your Overland Park, Kansas Fee-Only Financial Planner and Investment Manager.