Your Tax Refund: Still The Top Target Of Identity Thieves

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Think filing your taxes is a pain? Imagine not getting your refund because an identity thief got there first and filed a fake return using your Social Security number. It’s happened to hundreds of thousands of U.S. taxpayers. And it’s cost the U.S. Treasury billions of dollars.

Tax fraud through identity theft topped this year’s list of the IRS Dirty Dozen tax scams for the third year in a row. In case you think it can’t happen to you, take a look at just a few of the complaints we obtained from the Federal Trade Commission, filed by consumers who were victims of tax refund fraud:

  • A taxpayer had her taxes rejected while filing with Turbotax. When she called the IRS to find out why, she was told that taxes had been filed for 2012 using her Social Security number. The agency said it had received three returns on her behalf. The victim’s online bank account was also compromised.
  • A taxpayer reported that someone was using his name and Social Security number to file fraudulent tax returns, obtain employment and open a credit card account. The identity thief changed the password to the victim’s email account in order to send emails and use the victim’s information to evade the law.
  • A taxpayer reported that someone had used her Social Security number to file a tax return for 2012. She only found out when her tax return was denied. The victim reported that someone had also gotten an American Express Card using her SSN.

Tax fraud was once again the most reported kind of identity theft in 2013. According to the FTC, it made up 30% of all identity theft complaints it received last year. If you’re wondering what’s fueling the epidemic of tax fraud, it’s most often the same thing that makes filing your taxes so easy: e-filing. More than 122 million returns were electronically filed in 2013. While that means less paperwork and faster refunds for taxpayers, e-filing has also made tax related identity theft shockingly easy to commit. Once a cyber crook gets hold of your name, Social Security number and other ID, it is easy to e-file a bogus return at the beginning of the tax season. When the IRS mistakenly sends a refund to the crook, your legitimate refund will be denied. And, not surprisingly, recovering it can turn into a bureaucratic nightmare.  

Women Becomes A Victim Of Tax Refund Fraud Three Times

Take the case of Marci Hossli of Lakeworth, Florida, who was a victim of tax refund fraud three years in a row. Hossli got a letter from the IRS informing her she was a victim of tax fraud for 2010 and 2011. She filed all the necessary paperwork with the IRS and other agencies to make sure it didn’t happen again. But the IRS didn’t put an alert on her account. So the day after her tax preparer filed her 2012 return, the IRS rejected it because a return had already been filed. “I should never have to go through anything like this, nor should anyone else,” Hossli told a Senate Committee. “I feel stressed constantly and have asked a doctor for help to deal with these problems.” Hossli eventually got her tax refunds. But they were delayed for a long time.

The IRS is cracking down on tax identity refund fraud.  In 2013, it started nearly 1,500 criminal investigations on tax-related identity theft, up 66% from the previous year. But unfortunately online tax fraud is often very difficult to trace. That means many cyber crooks who file fake returns are never caught. Most of their victims don’t find out there’s a problem until they get a letter from the IRS saying they’ve filed more than one return. If it happens to you, make sure you contact the IRS Identity Protection Specialized Unit at 800 908-4490, extension 245. 

Here’s what you can do to make it less likely you’ll become a victim of tax fraud.

Take Action To Prevent Tax Refund Fraud

  • Securing your tax information means securing your computer. Make sure your firewall is turned on and your anti-virus/anti-malware software is up to date.
  • Protect your passwords by making them long and strong. Change them often and don’t automatically save them.
  • Don’t give out your Social Security number or Medicare number unless it’s absolutely necessary. Ask why it’s needed and how it will be used and stored. If your SSN is stolen, file a police report, contact the IRS and request a verification PIN to file your taxes. Contact Experian, Equifax or TransUnion to put an alert or a freeze on your credit.
  • Watch out for phishing emails and websites that look as if they originate with the IRS. Remember, the agency will never contact you via email, text or social media.
  • File your taxes early in the tax season before identity thieves do.
  • Once you’ve filed your taxes, put all your tax files on a removable storage device. Then remove all your tax data from your computer to keep it out of the hands of data thieves.
  • Turn off file sharing and disable features that automatically connect you to any available wireless network. This will prevent you from accidentally connecting to a fake WiFi hotspot or a stranger’s computer.
  • Use a VPN like PRIVATE WiFi to protect your sensitive information whenever you use a WiFi hotspot. VPNs encrypt the data traveling to and from your computer. That makes it invisible to identity thieves.
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Jan Legnitto

Jan Legnitto is an investigative journalist and documentary producer who writes about criminal justice and intelligence issues. Jan is also a frequent contributor to the Private I blogs.