Understanding and Avoiding Tax Identity Theft

Business
Photo Credit: Better Business Bureau

Rebecca Harpster
Golden Gate Better Business Bureau


Have you started filing your taxes? Although taxes aren’t due until April 17, the sooner you file, the better. One of the biggest benefits is that filing early can help prevent tax-related identity theft. According to the Internal Revenue Service (IRS), “tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.”

Scammers’ aim is often to steal personal information, which can lead to identity theft, and they love tax season! Tax scams were BBB’s #1 scam for both 2015 and 2016. BBB saw around a 60% decrease in tax scam reports from 2016 to 2017, but consumers nationwide still reported more than 3,100 of them to BBB Scam Tracker (bbb.org/scamtracker).

The following tips from your BBB will teach you the signs of tax identity theft and help you learn how to avoid and deal with it:

  • Know the signs. You could find out when trying to file a tax return – the IRS notifies you that another return using your Social Security Number (SSN) has already been filed. You may also receive an IRS notice stating that you’ve received wages from somewhere you never worked, or receive other notices that don’t actually apply to you. Another big red flag is if you receive a notice that “you owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return” (IRS).
  • Watch out for tax scams. Watch out for any phone calls, emails or other contact from the “IRS”. These scams are designed to convince consumers of their legitimacy and trick you out of your money or personal information, but don’t be fooled. The IRS will never initiate contact with you over phone, social media or email. If you do receive unsolicited contact from the IRS, hang up and contact them directly at 1-800-829-1040 to verify legitimacy. For more information, visit bbb.org/taxscams.
  • Employers should also exercise caution. Tax ID theft often occurs when a workplace’s payroll or Human Resources department falls victim to a W-2 phishing scam. In this scheme, a fraudster pretends to be the “CEO” of a company and requests a list of employees and personal information (like SSNs, W-2s, etc.). The IRS “urges company payroll officials to double check any executive-level or unusual requests” for this type of personal information.
  • How to reduce your risk. Everyone can reduce their individual risk of tax identity theft by protecting their personal information. Learn to recognize and avoid all scams, not just tax scams – check out bbb.org/avoidscams. Always run updated anti-virus software on your devices, and use strong passwords (bbb.org/passwords). Don’t click on links or download attachments from unsolicited or suspicious emails. Finally, make sure to always protect your personal data. This includes shredding sensitive documents, guarding your SSN, and securing your tax records.
  • What if you’re already at risk? If you have been a prior victim of identity theft, had your SSN exposed in a data breach, or work at a company that was affected by a W-2 scam, you may be at greater risk. It’s important to file your taxes promptly, before a scammer can file them in your name. You may also want to consider getting an IP PIN from the IRS, a “number assigned to eligible taxpayers that helps prevent the misuse of their Social Security number on fraudulent federal income tax returns”.
  • What to do if you’re affected. If you receive any of the above “red flag” notices from the IRS, immediately respond by calling the number provided. If your return is rejected due to a duplicate filing, you’ll want to complete IRS Form 14039, Identity Theft Affidavit. Make sure to file a complaint with the Federal Trade Commission (FTC) at identitytheft.gov to learn next steps.

You can reach your BBB at info@bbbemail.org or (510) 844-2000, or by visiting bbb.org.

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