It’s wise to be wary of suspicious activity online at all times, but it’s especially important during tax season. Increasingly, there is evidence that cybercriminals lurk in the virtual universe in the weeks and months leading up to the annual tax filing deadline – April 18 in 2016 – searching for potential victims and the opportunity to steal your identity or use your personal information to commit tax fraud.
Think it can’t happen to you? Think again.
According to statistics from the Federal Trade Commission, fraud involving government documents or benefits accounted for 36% of identity theft in 2014..[i] The largest portion of this government-related fraud, according to the FTC, was fraudulent tax returns.
For 2015, statistics through November show the IRS rejected or suspended 4.8 million suspicious returns[ii]. The agency says it detected and stopped 1.4 million confirmed identity theft tax returns, totaling $8 billion. In addition, during that same time period, the IRS prevented $2.9 billion worth of refunds in other types of fraud. That’s a total of $10.9 billion in confirmed fraudulent refunds protected.
There also have been significant data breaches at the agency itself. Last year, the IRS revealed a data breach that had allowed cybercriminals to gain access to information in what they said at the time was 330,000 individuals’ tax accounts through the IRS’ “Get Transcript” application. The program allowed taxpayers to obtain their tax return information for prior years to help them prepare their tax returns. The stolen data included Social Security information, date of birth and street address. The IRS discontinued the program immediately and has offered identity theft protection to the victims. In February, the agency said that actually around 700,000 were affected.
How can you avoid being a victim of fraud at tax time? Following are recommendations can help reduce the risks:
Be Aware of Tax Preparer Fraud – Most tax preparers provide honest services, but some unscrupulous individuals may target unsuspecting taxpayers. Never sign a blank tax form and be aware that under IRS regulations, the preparer must sign it with his or her preparer tax identification number.
Make Sure Your Tax Preparer is Taking Precautions – Ask your tax preparer if his or her systems have been checked for malware issues. Also, ask about their cyber-security policy and if the firm has had any security breaches.
Take Precautions with Your Own Technology – Share documents with your tax preparer only over secure servers. If you file your own tax forms, make sure to use only a secure https site. Install anti-virus and anti-spyware software and be sure to update it as needed. Make sure the security software is always turned on and can automatically update, and use strong passwords.
Be Aware of Phishing Scams– Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card company and even the IRS. Do not click on links or download attachments from unknown or suspicious emails. So-called phishing emails often claim your account was hacked or ask you to respond quickly and can appear to be legitimate.
Tax Season Resources
- The Better Business Bureau offers Tips for Trusting Your Tax Preparer
- The FTC offers consumer-focused information about tax-related identity theft
- If you are a victim of identity theft, the Identity Theft Resource Center can offer advice tailored to your specific issue, a step-by-step plan and the necessary documents and letters you will need to implement your plan.
- The Internal Revenue Service offers advice on how to avoid tax fraud
Though there are precautionary steps you can take to avoid becoming a victim of identity text, ultimately it’s not your fault if someone steals your information. In an earlier post, I addressed the steps you should take if you do become a victim of identity theft.