How to Fight Tax Identity Theft

Tax season is a prime time for identity thieves to go to work, and last year (the 2014 tax returns) saw one of the biggest booms in reports of tax fraud. It can be devastating to your credit and your finances to find out that your information has been compromised and used to file for fraudulent purposes. Here we have a few tips on how to prevent theft from the start and a little on what to do if you find that it’s happened to you.

Preventing Identity Theft

One of the best solutions to tax identity theft is to prevent it early on. Here are some of the steps you can take to keep thieves from getting the chance to get or use your information.

File as Early as Possible

It’s not always easy for everyone to do, especially if you have multiple documents to get together. But the earlier you file, the less time you leave for identity thieves to use your information if they get ahold of it. So as soon as you have all the information together, be sure to get it filed and out of the way quickly.

Guard Your Personal Information

This is especially important with anything that involves your social security number. Avoid giving out the full number when you can and be sure to shred any paper you don’t need any more that has the information. Be sure to shred bank and credit card statements as well once you’re done with them.

When working digitally, change financial passwords on a set schedule, and pick passwords that are complex but have enough private meaning to you that you don’t have to write them down. Be sure your password is not being remembered on a public computer, and it’s really a good idea to only access your financial information on personal devices over secure networks. Be wary of coffee shop and store wireless networks that are unsecured and may expose your info to any identity thieves that are logged in to monitor for passwords and other data.

Verify Your Preparer’s Security

Whether you’re using a professional tax preparer or a do-it-yourself online service, do a little digging on their security with your information before you submit anything. Find out when their most recent breach was and how bad the exposure of information was. See if you can find out what systems they have in place to stop thieves from stealing your data so that you know who you want to trust.

Watch for Phishing Scams

Part of guarding your information is to avoid accidentally giving it to the wrong people. If someone calls you claiming to be an IRS agent, do not give them your information. The IRS does not call people unexpectedly, but identity thieves will call, claim to be the IRS, and try to use scare tactics to get information. If you get a call from someone claiming they need information, hang up and call the official number for the institution to verify.

Emails are also a big part of this. Avoid clicking directly on links in supposed emails from the IRS or financial institutions claiming you need to urgently supply some info. Instead, navigate directly to the site and log in or call the institution directly to verify that there’s anything going on with your account.

Send Paper Securely

If you pay bills or even file your taxes by standard mail on paper, be sure you’re adopting the habits to send it securely. Don’t put it in an open mailbox out front that anyone could get into. Instead drop such mailings directly at the post office and avoid leaving them anywhere that they could be accessed. Be sure to use a security envelope for anything that might have personal and financial info on it.

After Identity Theft

If you do find that someone has used your information to file your taxes, here are a few steps you can take.

Act Quickly

Don’t wait if you have the slightest suspicion that your tax identity has been stolen. Start working on the steps you need to take with the IRS and state agencies immediately to resolve the issue. In most cases it can take up to 180 days to sort everything out and the sooner you start the work, the sooner you can get things back on track. The IRS has several guides available on steps to take with Identity theft.

Protect Your Credit Score

After you’ve checked in with the IRS, your next step should be contacting one of the three major credit bureaus (Equifax, Experian, TransUnion) to report a fraud alert and possibly put a freeze on your credit to avoid further damage. At this time, you may also want to request a detailed credit report from one of the bureaus to look for any suspicious new accounts that have been opened in your name. The freeze will have some drawbacks as you’ll have to put a lot of extra work into any major purchases by temporarily unfreezing your account. Still, it is important to protecting your future credit from further identity theft.

Check Your Other Accounts

Be sure to take a close look at your bank, credit card, and any other financial accounts to see if identity thieves may have struck there too. Look for any odd transactions that you don’t remember making and if you see something, contact the individual institution immediately.

Report Theft to the Federal Trade Commission

The FTC tracks instances of tax identity theft and gathers information for determining how thefts are occurring. In some cases, they can offer some further help in dealing with the theft when you find that your case is similar to others that have been reported. The information you give them also helps them put together warnings and statistics to help others stop tax identity theft in the future.

Tax identity theft can strike anyone, but with a few precautions you can minimize the chances and be prepared in case it does happen to you to minimize the damage. It’s your return, so make sure no one else can claim it or falsify it.

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