There are many reasons to start thinking about doing taxes early, and one of them just happens to be preventing tax fraud. Since the COVID-19 pandemic, there has been a rise in tax fraud, and tax-related crime-including identity theft. Experts warn consumers to take action early. Filing taxes early can thwart fraudsters, whose ruse is to file refunds early, and it can protect your own refund while preventing tax chaos later. As time passes, the odds that a bad actor will gain access to your Social Security number seem to increase alongside the growing number of high-profile data breaches.
NBC news correspondent Rob Wile interviewed Anjali Jariwala, who is a certified financial planner, a public accountant and the founder of FIT Advisors stated fraudsters have extra incentive to submit fraudulent tax returns as quickly as they can. As a result, legitimate filers could be “running against the clock” to file valid returns.
Filing early, Jariwala said, “minimizes the chances of someone else filing a return on your behalf.”
“The IRS will automatically kick out [the fraudulent return] because they know a return has already been filed with your Social Security number,” she said.
In other words, this technique can make the IRS your ally. Other important sites include the IRS website itself, which includes information on reporting Identity Theft. You can visit Identity Theft Central if you think someone stole your identity and used your Social Security number for employment or if you suspect it’s been used to file a fraudulent tax return. You can also visit the Taxpayer Guide to Identity Theft. Your tax preparation expert can also help you navigate these pitfalls. However, experts universally suggest some basic tips to keep your info secure, and to keep yourself from having to deal with the legal nightmare that identity theft can become. Some tips from TurboTax include:
1. Leave your Social Security card home, and keep it private.
Tax-return identity theft almost always involves a stolen Social Security number (SSN).
To prevent identity theft, leave your Social Security card at home in a safe place and don’t carry any document that has your SSN on it.
Also, check your Social Security Administration earnings statement annually to make sure all your information is accurate.
2. Choose strong, unique passwords
Start by choosing a strong, unique password for each financial site you use, such as online banking or brokerage accounts. Don’t have your computer automatically save passwords, especially on work computers, and change passwords regularly. 12345 is not a strong password. And no repeats! If someone hacks it once, it makes all your accounts vulnerable.
3. Protect against computer spam and viruses
Take advantage of the security software updates your operating system offers and make it a habit to use a firewall and anti-spam and anti-virus software. Before you donate or recycle an old computer, consider using a data-wipe program to make sure nobody can recover your hard drive data. You can also remove the hard drive and have it professionally destroyed.
4. Keep financial information private
Social engineering is easy. Anyone can pretend to be a bank worker. Thieves who can’t hack into your computer for your financial information may try to get your information in other ways. Be wary of providing personal information over the phone or through the mail. Unless you have initiated the contact or you are sure you know the person you’re talking to, it’s better just to say no.
5. Beware of phishing
Phishing is a term for online scams that use official-looking emails that seem to come from the IRS or your bank, but actually are from thieves seeking your SSN, bank account information or passwords. Always be suspicious of this kind of email. The IRS never requests financial or personal information in email communications, and neither do legitimate companies. In addition, the IRS won’t call you to tell you that you owe taxes. They will send you a letter.
6. Shred bank and tax documents
Even if you aren’t interested in that credit card solicitation, a thief might be. He could plan to get a credit card in your name as a first step toward obtaining your SSN. Treat these pieces of junk mail like dangerous documents by:
- Shredding credit card solicitations.
- Getting off the list for pre-approved credit card offers by calling 1-888-5-OPTOUT.
- Reducing junk mail by changing your preferences at the Direct Marketing website.
7. Keep on top of data breaches
With so many data breaches making headlines in recent years, it’s more important than ever to safeguard your information and check for fraud. Not every type of stolen personal information will result in tax-related identity theft, but there are things you can do to help prevent becoming another victim including:
- Find out what type of data was taken, if you receive notice of a data breach or computer hack.
- Stay in close contact with the affected company and find out what it’s doing to protect you.
- Contact one of the three major credit bureaus to place a “fraud alert” on your credit record.
- Fill out and send IRS Form 14039, Identity Theft Affidavit.
8. Use Financial Tracking Apps like Hogo
Let an app like HOGO track your finances, and your digital footprint. It can alert you to new activity that could harm your financial identity, and credit. It also offers insurance for fraudulent activity.