Taxes are one of the two certainties of life. But we could add a third: tax season schemes that attempt to steal your identity — and possibly your refund.
Between January and April, authorities expect a wave of phishing scams by phone and email related to taxation and cases of identity theft. There are two common varieties of tax evasion, one that involves Social Security Numbers (SSNs) that are believed to have some kind of suspicious activity, and another that threatens people with a tax bill from a bogus government agency. .
The first involves scammers who use an email or phone call to threaten to cancel or suspend the victim’s SSN due to overdue taxes. Fraudsters pose as IRS agents, who threaten their targets with arrest and legal action unless they pay the fine “immediately.” Remember that the IRS does not engage taxpayers via email, phone calls, text messages, or social media to request personal or financial information.
The second scheme involves mailing an official-looking letter that threatens an IRS lien or tax levy owed to a non-existent government agency such as the Bureau of Tax Enforcement. The letter attempts to scare the recipient into paying the fine using a specific payment method such as a prepaid debit card, gift card, or wire transfer. (Note: the IRS never uses these payment methods.)
WHAT TO LOOK FOR IN TAX ID SCAMS
Tax identity theft is particularly difficult to detect before the fraud occurs. But here are some common telltale signs:
• If your federal tax return was already filed by someone else using your personally identifiable information (PII), they may try to bypass your refund. Then, when you file your legitimate return, the IRS will send you a notification letter stating that your refund has already been issued.
• Sometimes thieves who stole your SSN will use it to get a job and avoid paying taxes. But even if the scammer’s employer withholds taxes, his employer will report that income to the IRS. Once the IRS detects the discrepancy, they will send you an action letter stating that you have not reported all of your income.
• Over the past two years, there has been an outbreak of COVID-19 scams related to Economic Impact Payments, where identity thieves use call, text and email phishing attempts. email to ask you to verify or provide your financial information so you can get a faster government payment or refund.
Victims of tax identity theft usually only find out they’ve been defrauded when the IRS refuses to process the legitimate return because the listed “taxpayers” have already filed returns and refund checks have been issued. . Sorting this out can be a big problem.
FIVE RECOMMENDATIONS TO AVOID TAX IDENTITY WEAR
Here are five steps you can take to avoid becoming a victim:
• Secure your sensitive information. Never send sensitive personal information via email or SMS. The IRS will never contact you through these methods, so if you receive email or text requests that appear to be from the IRS, ignore them. If you produce online, always use a secure connection.
• Drop off early. If you have the opportunity to file your return early, do so. The IRS processes returns primarily on a “first-come, first-served” basis, and filing early takes advantage of criminal-free delays.
• Protect your social security number. Be very suspicious if (1) you receive a letter from the IRS about a tax return you haven’t filed; (2) are not permitted to file your tax return electronically due to a duplicate SSN; (3) receive a notification that an online IRS account has been created in your name when you have done nothing; or (4) you receive a notice from the IRS stating that you received salary from an unknown employer.
• Check your credit report regularly, at least once a year. You can upload your credit report for free once a year to freecreditreport.com during tax season and freeze your credit if needed.
• Register for an Identity Protection PIN (IP PIN). Last year, the IRS made its IP PIN program available to all taxpayers. Previously only available to victims of identity theft or taxpayers in certain states, the IP PIN is a six-digit code known only to the taxpayer and the IRS. This helps prevent fraudsters from making false claims using your PII.
If you or your business has been the victim of tax-related identity theft, contact the police or FBI and visit the IRS.gov website to learn about other steps you can take.
The opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations to any individual.
Bruce Helmer and Peg Webb are financial advisors at Wealth Enhancement Group and co-hosts of “Your Money” on WCCO 830AM Sunday mornings. Email Bruce and Peg at [email protected] Securities offered by LPL Financial, member FINRA/SIPC. Advisory services offered by Wealth Enhancement Advisory Services, LLC, a registered investment adviser. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.