Now that April 15 is fast approaching, you probably have a lot on your mind. One of the things probably not on your mind during tax time is identity theft. This makes sense in a lot of ways; after all, what kind of mischief can fraudsters make in terms of your tax return?
Unfortunately, the reality is that tax time is a prime time for identity theft. If you aren’t careful, you could hand your vital personal information over to a scammer. On top of that, you might find that ID theft has resulted in someone else claiming your tax refund.
Tax Preparer Fraud
One of the things that you have to be on the watch for is tax preparer fraud. In these cases, a shady tax preparer promises you a bigger refund. Unfortunately, the methods used to obtain the bigger refund might not be IRS-approved.
A tax preparer might inflate your deductions, or misrepresent your income as lower than it actually is. In some cases, shady tax preparers claim credits that you aren’t entitled to. When the paperwork is done, the preparer shows you how big your refund is, and you are thrilled.
Unfortunately, if the IRS catches out the return, you will be on the hook for the penalties and interest. Plus, an accountant shady enough to resort to these tricks to inflate your refund isn’t likely to represent you to the IRS. You’ll be on your own.
Be especially wary of accountants that offer to prepare your return for “free” in return for a percentage of the refund. You’ll be charged up front, based on the amount you are shown. If you pay based on that wrong information, you will be out even more when the IRS rejects your paperwork.
On top of this, some fraudulent preparers will steal your personal information.
Scams to Get Your Personal Information
Some tax time identity theft scams go beyond just trying to get you to pay a little extra. There are tax preparers that are outright scammers. They tell you they are preparing your return, but really they want your information.
Your tax return is a huge source of sensitive personal information. Your name, address, Social Security number, and other information is shared on the form. If you want to receive your refund via direct deposit, even your bank account and routing information is included.
All a fraudster has to do is get the information for the tax form and then take off with your identity. Your return might not even get filed in this case, and then you’re on the hook for a failure to file on top of everything else. Watch out for tax preparers that approach you at community events, or that are willing to come to your home. Be sure to vet an accountant or tax preparer before entrusting him or her with your most personal information. Otherwise, you could find yourself a victim of identity theft.
How Safe is Your Tax Refund?
Another tax time identity theft scam that might impact you is refund fraud. With this type of identity fraud, the scammer uses your Social Security number and name to claim a refund. He or she simply fills out the Form 1040 using your information, and has the refund sent to his or her address.
When you file your own taxes — legitimately — you end up having your return rejected. The IRS thinks that you have already filed and received your refund. When you find that someone has claimed credits and a refund in your name, you need to act fast. You will need to prove your identity and file a Form 14039. Make sure you do it as quickly as possible.
A Note on Tax Time Phishing
Finally, be aware that phishing is a common way for identity fraudsters to try and get personal information. You’ll receive a scary-sounding email that says that there’s something wrong with your refund, or that you owe taxes and are facing jail time. You’ll be asked to click on a link and provide personal information an ID thief can use.
Realize that the IRS won’t ask for this information via email. If you are to receive an official communication of this nature, it will be via snail mail.
Be on your guard. Tax time identity theft is a very real threat to your finances.