How to Prevent Tax-Related Identity Theft

In this ever-changing electronic age, it’s never been easier to conduct business and take care of finances through a computer or smartphone. But this convenience comes at a cost. It’s also never been easier to steal someone’s identity and use that fake identity to engage in crime. The good news is that most cases of tax-related identity theft can be prevented by following a few simple rules.

Don’t Go Phishing

Phishing is the process where an unsolicited electronic communication (usually an email or text message) purports to be from a legitimate source to trick the recipient into providing personal information. For example, a scam artist might send an official-looking IRS or bank email to a potential victim and ask the victim to provide a date of birth, name, address and social security number to “confirm” that their account or tax return is in good standing.

If you ever get this type of email or text message, ignore it or report it to the institution the communication claims to be from. And if you think it might be legitimate, contact the organization that purportedly sent it to confirm if it’s legitimate before providing any personal information.

Be Careful of Fake Charities

Before donating money to a charity, be careful when providing personal information. In many instances, it’s not necessary. And if it is necessary, it doesn’t hurt to do some background research through an online search engine or on social media to check out the charity’s reputation. You can also use the IRS’ Tax Exempt Organization Search tool. If a charity isn’t on this list, it could still be legitimate, but any donation will probably not be tax-deductible.

Don’t Fall for Telephone Scams

One of the older tricks, some scammers will call their victims and trick them into thinking they’re someone else, such as an IRS agent or creditor. Depending on how the scheme works, the scammer will ask for the victim to send money through unconventional means or provide sensitive financial information, like a credit card number. Do not do this. If you have a legitimate financial debt, don’t try to pay it off over the phone or by using a dodgy means of payment, such as a money order or gift card.

Use Common Sense

Common sense is probably the biggest tool in avoiding identity theft, whether it has to do with taxes, your bank or other financial institution. For example, do:

• Protect your social security number and don’t give it out unless required.
• Notify a trusted neighbor or your post office if you will be unable to check your mail on an extended trip away from home. You can ask the post office to hold your mail or your neighbor to collect your mail while you’re gone.
• Before disposal, shred or otherwise destroy documents with sensitive information on them, like account or social security numbers.
• Create strong online passwords. When making a new password for an online financial account, use a mix of random letters, symbols and capitalizations. Also, use just one password per account.
• Create an IP Pin when filing your taxes. The  IP PIN is a special six-digit number that is to be used along with a social security number when filing taxes. This makes it far more difficult for an identity theft to file a fraudulent tax return pretending to be someone they’re not.

Report Fraudulent Activity

If you suspect you or someone you know has been the victim of a tax-related identity theft scheme, please contact the Federal Trade Commission or the Tax Inspector General for Tax Administration to report what happened.

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