PROTECTING YOUR TAX IDENTITY
One of the major identity thefts is Tax Identity Theft.Tax id theft occurs when someone gains your information and files a fraudulent tax return in your name. Stolen identity is scarily simple: all it takes is your social security number (SSN).
How do criminals obtain your information?
There are many ways thieves can steal your identity, such as:
• Retrieving your data with a virus on your digital equipment (laptop, phones, servers)
• Stealing bank or credit cards credentials by hacking store’s servers or website
• Impersonating organizations in emails, or text, usually by sending you a link or attachment to click (phishing)
Signs that you may be a victim of Identity theft
The majority of identity theft victims do not realize that they are a victim until it has negatively impacted their lives. The following are indicators that someone else might be using your identity:
1. Financial indicators:
• Credit card charges for goods or services you are not aware of
• Receiving credit cards that you did not apply for
2. Tax indicators:
• Your tax return has been rejected.
• you have a tax balance due or the IRS has initiated a collection action against you
3. Criminal indicators (extreme cases!)
• the police is at your door arresting you for crimes that you did not commit
How to prevent ID theft?
1. Protect your Social Security number
• shred documents with your SSN before discarding them
• Do not disclose your SSN over the phone, instead request an alternate identification such as a security questions or a pin.
• do not divulge personal information over the phone unless you initiated the call
Check your SSN account yearly to identify other fraudulent activity: http://socialsecurity.gov/myaccount/
2. Protect your digital information
In today’s age, our personal valuables are stored on digital devices rather than in a bank safe. So protect your devices with these steps:
• Install antivirus on all devices (computers, laptops, phones)
• Do not email sensitive information and instead use encrypted email services
• Use password protected cloud backup.
Check your credit report yearly for any fraudulent activity – obtain a free credit report from the 3 credit bureaus (Equifax, Experidan and Transunion) at: www.annualcreditreport.com
3. Protect your tax information
Most tax professionals file honest and accurate returns. However some dishonest tax preparers will make false claims for refundable credits (such as EITC credit, education credit, child credit). The warning signs to look for: the tax preparer does not give you a copy of the return, the fees charged are based on your refund amount, or the tax preparer does not sign the return with his personal tax identification number (PTIN).
• Check the credentials of your tax preparer at the IRS website.
• Do not accept a tax return that is not signed by the tax preparer identification number (PTIN).
Check your tax account yearly: you can view your balance online on the Internal Revenue Service (IRS) website. The tool will allow you to consult your payoff amount, the balance for each tax year and up to 18 months of payment history. - To access the online tool: https://www.irs.gov/uac/view-your-tax-account
You can also request an account transcript to check your tax balance. To request an account transcript: https://www.irs.gov/individuals/get-transcript
Who to contact after an identity theft?
• File a police report and get a copy of the report or case number.
• Report the incident to the Treasury Inspector General for Tax administration (TIGTA) -https://www.treasury.gov/tigta/contact_report_scam.shtml
• File a complaint with the Federal trade commission - https://www.identitytheft.gov/
• place a fraud alert and/or freeze your credit score. – The alert can stop someone from opening a new credit account in your name
• Call your financial institutions (checking & credit card accounts) to stop fraudulent activity and get new credit and debit cards
Contact the IRS to obtain your IP PIN
To combat id theft, the IRS has put in place protections through its IP PIN program. The Identity Protection PIN (IP PIN) Program is a six-digit number assigned to taxpayers to help prevent the misuse of their Social Security Number (SSN) on fraudulent tax returns. Once you receive your IP PIN, you must use it on your tax returns. An IP PIN helps the IRS verify your identity and accept your tax return. It prevents someone else from filing a tax return with your SSN. The PIN is assigned and renewed yearly by the IRS.
To read more on the IP PIN Program - https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
Always use a trusted professional to prepare your tax returns! Karine Bauer, EA is an Enrolled Agent licensed by the Treasury Department with unlimited rights to represent taxpayers before the Internal Revenue Service. She is an experienced tax professional with more than 20 years of international experience.
As always, the views contained in this article are not tax or legal advice and are not a substitute for consulting with a tax professional.
Updated May 15th, 2019