Identity Theft Refund Fraud
Identity theft refund fraud is a widespread fraudulent scheme where criminals use stolen identity information to file bogus tax refund claims. This form of identity theft has grown substantially over the past few years. In 2013, the IRS estimated that it sent over three million fraudulent refunds to criminals which cost taxpayers around $5.2 billion dollars.
While taxpayers are not financially liable for fraudulent returns, the time and effort in responding to this common form of tax fraud can be considerable; Additionally, experiencing this type of fraud often implies that your identity information has been collected by criminals.
In 2013, over three million fraudulent refunds issued. Cost to taxpayers: $5.2 billion.
How To Protect Yourself
One of the reasons that this form of fraud is so successful is that identity thieves have over the years gained access to large amounts of identity information (e.g. names, dates of birth, ssns); Additionally, the IRS typically only uses basic personal information to identify taxpayers. While there is no perfect defense against this type of fraud, there are some steps that can certainly help.
Step 1. Get a Confidential E-File Personal Identification Number (PIN)
For electronic filings, the IRS validates the identity of the taxpayer by asking for previous Adjusted Gross Income or an electronic filing PIN. While not a complete defense, establishing a E-File PIN can raise the bar for identity thieves who attempt to E-File a fraudulent return in your name. To establish an E-File PIN you can visit the IRS site listed below:
http://www.irs.gov/Individuals/Electronic-Filing-PIN-Request
Step 2. File Your Return Early
Identity thieves depend on trying to get their fraudulent return filed before you file your legitimate return. Therefore if possible, try to file your return as soon as possible to help lower the likelihood of someone submitting a fraudulent return before you do.
Step 3. SafeGuard Your Identity Information
- Paper Documents - Keep your Social Security Card or other personal documents in safe and preferably locked locations (file cabinet, personal safe, or bank deposit box). Shred any unneeded materials that may contain this information.
- Limit Sharing - Limit sharing of your personal information (social security number, account info, date of birth). This information should not be posted on social networks and also question whether companies or businesses need access to this information to assist you.
- Personal Cyber Security - Keep your personal computer and mobile device safe by following a few basic security best practices.