Income Tax Refund Fraud – Things You Need to Know to Protect Yourself

Income Tax Refund Fraud – Things You Need to Know to Protect Yourself

The 2014 tax season is over, but income tax refund fraud is at an all-time high and growing fast. In a recent article on Identity Theft, Laura Sanders of the Wall Street Journal used Robert Jack as an example of what is happening to millions of people.  She said, “Mr. Jack, a retired federal cybersecurity expert in Alexandria, Va., who now works as a consultant, shunned online tax-preparation programs that store data on the Internet. He researched the security features of different software programs and opted for a packaged—not downloaded—product. He checked the package for signs of tampering before loading it into his secure home computer.

Yet soon after he tried to electronically file his federal tax return through TurboTax on Feb. 14, the company told him it been rejected because someone already had filed using his Social Security number.”  The IRS states that in 2010 there were 400,000 suspected tax identity theft incidents that grew to almost two million in 2013.  Do everything you can so that this doesn’t happen to you.

What do you do to protect yourself?  

Ask for an ID PIN. The IRS issues victims of tax identity theft a six-digit Identity Protection PIN for use in filing returns once cases have been resolved. Returns can’t be filed without the number, and the taxpayer receives a new one every year.

But you don’t have to be a victim to obtain such a PIN. The lucky residents of Florida are now able to get this ‘pin’ as Florida, along with Georgia and the District of Columbia have the highest percentage rates of tax identity theft in the nation.  The form you need is IRS 14039 and to get one, apply at

The IRS reminds taxpayers that it never initiates contact by email, text messages or social media.

Additional Steps to Take:
Shun email links and attachments. Realistic-looking emails can harbor malware that could steal your information—a practice known as phishing. Many massive government and corporate data breaches happen this way.  If you want information from a company, DO NOT respond to an email.  Instead Google the company name to find out the correct website, then go to that website to see if they have or don’t have what you are seeking.  Often, companies do not offer what the “phishing” email said they did.

Be vigilant. As of now, there is no way to find out if someone has already filed a tax return using your Social Security number until you send in your own. Filing early is one of the best ways to protect yourself.

Meanwhile, be vigilant when using your computer.  Delete “cookies” every day!!  Use strong passwords – that include letters, numbers and characters and change them frequently. Do not store your passwords on your computer.  Keep them in a “Rolodex” type file and/or use a password management system such as “Lastpass.”

Update computer applications, especially antivirus software, and make sure that your Wi-Fi access is password-protected.

Be careful with paper mail, especially during tax season, when sensitive documents arrive. Guard against theft of such documents and be careful when disposing of them, as thieves can make use of partial information such as a date of birth or bank account number.  Always shred these items with a cross-cut shredder.

Think twice before paying for ID-protection services, experts say. Typically they don’t claim to prevent tax identity theft, which is the most common type of such theft, according to Federal Trade Commission statistics. Most services actually help more with recovery than prevention.

If you are a victim, know what to do, do it quickly and don’t expect speedy resolution. The IRS has a list of steps for victims to take at before calling the agency. They include filing a police report, an affidavit with the IRS and a complaint with the Federal Trade Commission; contacting one of the three major credit-reporting companies to place a 90-day fraud alert on your credit records; and closing any fraudulent accounts opened in your name.

Victims may want to impose a credit freeze with the credit-reporting firms, which can prevent extensions of credit using their identity.

They should also file their tax returns on paper, the IRS says.  It can take three to six months or more to resolve your case.  The IRS says that tax refunds aren’t paid until a case is closed, so you may want to minimize them by not having too much money withheld from paychecks.

Income tax refund fraud is nowhere near as dangerous as other types of identity theft. Like all government processes, this process is painfully slow, BUT taxpayers are able to work things out with the IRS.