It’s Tax Identity Theft Awareness Week! IRS Tax Refund Fraud – Tax Related Identity Theft and How It Can Happen to You
IRS tax refund fraud resulting from identity theft occurs when someone uses your stolen identity to file a fraudulent tax return and collect a refund. A hacker files a fraudulent IRS tax return in your name using your social security but routes the refund to a bank account they can access. Often, the victim first discovers that tax fraud has occurred after they attempt to e-File their own ta return and the IRS rejects it as a duplicate. Scammers may also use stolen Social Security numbers of children to claim them as dependents on a fraudulent IRS income tax return. The legitimate parent or guardian may receive a letter notifying them that a dependent on their return has already been claimed on another tax return.
The Federal Trade Commission (FTC) has declared February 3-7 Tax Identity Theft Awareness Week. This week, we’ll help educate taxpayers on how to detect and protect against identity theft related to income tax filing.
How Do Hackers get Your Social Security Number?
Hackers can get sensitive personal data from data breaches. The may also buy data, credit card numbers, spyware, illegal drugs, email addresses, passwords,and all types of goods on the dark web. Last week, over 30 million payment cards from the WaWa data breach were put up for sale on dark web marketplace Joker’s Stash. In 2017, Atlanta based credit reporting agency, Equifax, was hacked. The personal information including Social Security numbers of 143 million US citizens was exposed in a massive data breach.
Identity theft is not the only type of tax return fraud. Unlicensed tax preparers may encourage clients to claim false deductions so they can get a larger refund. Scammers may call taxpayers an intimidate them into paying their taxes over the phone with credit cards. Requesting payment in gift cards is another common tactic for all types of online scams as gift cards are untraceable. In other scenarios scammers may call taxpayers and instruct them to redirect a refund to a bank account the scammer has access to. Each year, the IRS publishes a list of the top tax scams, known as the IRS Dirty Dozen.
Related Tax Scam Reads:
- IRS Warns of New Email Tax Scam
- IRS Warns of 2 New Delinquent Tax Scams
- Tax Scams – Beware of the Taxpayer Advocate Service Scam
Warning Signs That You’re a Victim of Tax Refund Identity Theft
The IRS never calls and demands payment over the phone. First contact from the IRS to resolve tax filing issues is sent in writing via regular US Postal mail service. An unsolicited phone is a major tip off that the call is actually a scam phone call. The IRS also never takes any form of payment over the phone.
If a hacker has used your Social Security number to file a fraudulent income tax return, you may receive a letter from the IRS inquiring about a suspicious tax return that was not filed by you or a tax preparer your hired. The most worrisome sign of tax return identity theft is if you are unable to e-File your won tax return because the IRS rejected it stating that a return has already been filed using your Social Security number. If a hacker stole your dependent’s Social Security numbers and claimed them on their tax return, you’ll get a notice from the IRS about the duplication.
You might also receive a tax transcript from the IRS in the mail even if you have not filed yet.
Signs of IRS Tax Return Identity Theft
- The IRS sends a written notice that an online account has been created in your name
- You get an IRS letter stating that your existing online account has been accessed or disabled
- You receive an IRS letter that you owe additional tax payments
- The IRS has taken collection actions taken against in a year you were not required to file a tax return
- Your IRS transcript states that you received wages or other income from an employer you didn’t work for
Tax Refund Fraud Identity Theft – How It Happens
Hackers steal personal information in a variety of ways. It is very common that people use the same email and password combination across multiple online accounts. So, if a hacker can get into one online account – like an eCommerce website – they may easily use that same password to get into a credit card or bank account. Social media accounts may seem like they contain only innocuous information. However, publicly accessible information taken from social engineering can be used to hack into higher value, sensitive accounts. For example, am Instagram account may contain the answers to common password reset questions like hometown and pet’s names. If someone uses public WiFi at a coffee shop, airport, hotel, or other location to post to Instagram, a hacker can steal your password and data to hack into your IRS online account if they share the same password.
How Do You Know If Your Identity Has Been Stolen?
Your payment cards or identity may have been stolen if you notice unusual activity on your bank or credit card accounts. The most obvious sign is that there are purchases on your account that you did not make. If you use an identity protection app, you may be alerted to new accounts or lines of credit opened in your name. If you are denied credit you are entitled to a free credit report.
Not all companies notify account holders immediately as there is no law governing the amount of time they have to let the public know there was a data breach. Financial account monitoring is one of the best ways to be alerted to unusual activity.
How to Prevent Tax Return Identity Theft
It seems that nowadays that payment card fraud is in inevitable. Although there is no guarantee that and app can protect you and that your identity won’t ever be stolen , you should certainly take steps to protect your information and keep it as secure as possible. Learn how to avoid an IRS tax scam.
- Use antivirus software to protect your computer from malware and spyware
- Use a virtual private network (VPN) to protect sensitive personal information
- Use strong passwords. Create a unique password for each online account
- Use two-factor authentication (2FA) or multi-factor authentication for online accounts
- Only enter information on website that are secure. Look for HTTPS web addresses
- Back up tax returns and important files to an external hard drive
How to Protect Your Tax Return Information
- Keep antivirus apps updated with the latest security patches so it can defend your laptop against malware
- Use a quality VPN app to protect sensitive personal information
- Never use public WiFi -like that found in a library or coffee shop – to file a tax return
- Use a unique password to protect your online IRS account. Store passwords in a password manager. if you cannot remember your tax filing password year-to-year
- Never respond to emails that claim to be from the IRS
- Only give personal and financial information on encrypted website connections. Look for HTTPS addresses. The letter “S” stands for secure
What to Do if Someone Has Already Filed Taxes In Your Name
If you suspect you are a victim of identity theft, you must still file a tax return. This may mean that you have to file a paper tax return to avoid a late filing penalty.
Go to IdentityTheft.gov to report and recover from identity theft.
Michelle writes about cyber security, data privacy focusing on social media privacy as well as how to protect your IoT devices. She She has worked in internet technology for over 20 years and owns METRONY, LLC. Michelle earned a B.S. in Engineering from Rensselaer Polytechnic Institute. Michelle published a guide to Cyber Security for Business Travelers