Filing your taxes and seeing a nice, chunky refund due from the government is a wonderful feeling. You start planning all the things you’ll do with that money. Vacation plans, payoff some debt or even purchasing that new 4K TV you’ve been pondering all become a reality. You anxiously file that tax return electronically to the IRS and start to wonder how quickly you’ll get your refund back this year. But, something is terribly wrong. The IRS has rejected your tax return. The reason rocks you to the core with fear. Someone has already filed a return in your name and your tax refund has been stolen.
Understand the Tax Return Fraud Epidemic
Nowadays, we have a very good understanding of identity theft and how it can impacts our lives. Fraudsters are out to get your money wherever they can; and your tax return is no exception. So why are thieves nabbing this information and what do they stand to gain from it? Simply put, someone is obtaining your social security number and using it to file a tax return in your name in an effort to confiscate your tax refund before you get to it.
Because of our growing developments and reliance on technology, tax return fraud has become an easy scam to pull off. A thief can input fictitious wage earnings, phone numbers, and an address on your tax return, submit this information online, choose to receive their ‘return’ via direct deposit, and, within a couple weeks run away with your refund, all without your knowledge. Now, the IRS does keep records of your earnings and other types of taxable income but they match the information submitted to the tax records on file months after the refund gets issued meaning the identify thief not only received your refund, but they probably already spent it and moved onto the next victim.
So What is the IRS doing about This Problem?
The IRS, state tax administrators and companies in the tax industry have formed working groups and agreed on coordinating steps to combat tax-related identity theft. They will share information amongst each other in the back-end through multi-layered authentication regarding suspicious returns, verify if a return was filed from a trusted computer and internet connection, verify the time a user would take when filing a return electronically, and implement stronger authentication methods to verify a taxpayer's identity and data. There were even further discussions of increasing security through user names and passwords.
Since 2015 the IRS has made great strides and continues to fight aggressively in combatting identity theft and tax refund fraud. In calendar year 2015, through November, the IRS rejected or suspended the processing of 4.8 million suspicious returns and has stopped 1.4 million confirmed identity theft returns, totaling $8 billion. Additionally, through November they have stopped $2.9 billion worth of refunds in other types of fraud. That’s a total of $10.9 billion in confirmed fraudulent refunds protected.
How Can You Protect Yourself from Tax Fraud?
While it’s scary to think that someone can almost walk away with your tax refund without yours and the IRS’s knowledge, the IRS and FTC have made some recommendations so you can protect yourself for the next filing season:
- Invest a Little Money into Anti-Virus Software with Firewall and Internet Security – chances are, you already have software like this on your computer. If you do, make sure your software isn’t expired and that the anti-virus, firewall, and internet security protections are turned on and up to date
- File Your Return as Early as Possible – this will allow you to beat any fraudster to the punch from filing a return in your name. Remember, if your return is filed electronically, the IRS will automatically reject the second return once it’s filed
- Avoid Carrying Your Social Security Card with You Whenever Possible – self-explanatory and a critical component to protect yourself online
- Avoid Opening E-mails and Attachments that Seem Suspicious – chances are they might be and if you open anything like this you could be knocking on the door to disaster
- When in Doubt File with an Expert – if you don’t feel comfortable filing online, then it’s imperative to visit a Certified Public Accountant or tax preparer at H&R Block that can help you file either via paper or electronically