From credit card theft and mortgage closing fraud to charity scams and phishing attacks, the number of threats to ordinary citizens seems endless today. Protecting personal wealth is no longer about keeping it safe from burglars. It has become a much more complex and tedious process with numerous curveballs thrown your way at every corner. Come tax season, and there’s the additional headache of tax fraud. And they are not just prevalent but escalating in numbers, too.
IRS identity theft, for example, has become a growing concern for taxpayers and governments alike. Both parties stand much to lose as various scams redirect taxpayer money to the coffers of criminals. So, how can you detect, fix, and prevent tax fraud? Let’s find out.
Have You Become A Victim Of Tax Fraud?
Identifying tax fraud is often easier than many other common scams. Here are 5 typical signs that you’ve become a victim.
- Receiving an IRS notification rejecting your tax return documents due to a duplicate tax filing. If you’re filing online, you might find a message that your tax claim is already submitted.
- Receiving a letter from the IRS about suspicious account activities related to your tax ID.
- Finding that online access to your account is suddenly blocked.
- Getting a letter informing you of tax dues when you have, in fact, already paid all taxes on time.
If any unusual activities stand out as glaring signs of a tax scam, it’s first important to document evidence. For example, you can request a copy of the earlier tax claim if there has been a duplicate filing. Once you’ve gathered relevant information, contact the IRS. Depending on the scam, they will guide you with the reporting process and documents to submit.
You’ll also need to report tax fraud to the Federal Trade Commission on their identitytheft.gov website. They will issue a formal report on your complaint and provide a recovery plan. The latter will detail the essential steps to minimize potential damage. These can include lodging a police report, placing a credit freeze with the three credit bureaus, and replacing any government-issued IDs. Following their guidelines would be crucial for you to recover from fraud and prevent it from affecting your daily activities.
Essential Steps To Outsmart Fraudsters
If you want to protect yourself from tax scams and stay one step ahead of racketeers, then you need to focus on prevention.
1. Avoid A Last-Minute Rush During Tax Season.
The longer you wait to submit tax returns, the easier it gets for a fraudster to make a refund claim ahead of you. Once they do, your tax claim becomes a duplicate. So, for example, your electronic submission will get rejected. Of course, this can help you identify possible identity theft, so you can alert relevant authorities and strengthen security measures. But it will also entangle you in a lengthy process of investigations to get the duplicate filings rectified.
So, if you’re in the habit of waiting till the last moment to file your tax returns, the best option is to start well in advance.
2. Keep Personal Identifiable Information (PII) Safe.
Most tax scams begin with stolen taxpayer information. Using them is much easier than fabricating synthetic identities. So, needless to say, protecting personal data is critical to avoid tax fraud.
As a best practice, install malware protection on your devices to strengthen device security against a hacking attack. Keep your social security cards, tax claim copies, and other confidential data stored in a secure location under lock and key. Avoid carrying them with you, and especially be wary of sharing them with others. The more you share, the greater the risks of data mining, trading, and theft. Large-scale organizations are no more immune to cyberthreats as you are. It’s the easiest way for cybercriminals to access massive databases of personal information. And once breached, they could even get sold on the dark web and exchange hands many times, increasing your chances of becoming a fraud victim.
3. Guard Against Phishing Scams.
Phishing attacks are responsible for over 80% of reported security breaches, and they will continue to take center stage in 2021 as well. For fraudsters, they are easier to execute and have a higher probability of success. Email phishing, for instance, could be extremely convincing. In fact, they manage to deceive 97% of users. These scams could take place in person or over the phone, too. And they are almost always executed with a single objective in mind: to mislead you into sharing personal information.
So practice caution, whether you get an email or receive a phone call soliciting confidential, sensitive, or personal data. Refuse to disclose any information without first verifying the source of the request.
4. Choose A Reputed Tax Preparer.
A fraudulent tax preparer could not only mislead you on tax refund claims but can cause significant reputational and financial damage with erroneous tax filings. They can even steal personal data and use it to commit tax fraud.
Therefore, it’s essential to select your tax preparer with a lot of caution. Always seek a recommendation from a close friend or colleague and verify their identity and background before appointing them. Choose a qualified professional and avoid ghost preparers at any cost. It’s also critical to take a keen interest in the tax filing process. Don’t hesitate to ask questions and dive deeper into the documents they prepare.
Tax fraud is highly prevalent today, and it will continue to wreak havoc for taxpayers for years to come. Of course, governments and public agencies are doing much to crack down on tax scams and educate their citizens to minimize threats. But criminals will always find creative ways to target their victims. So, taking active measures to protect your identity and ward off tax fraud attempts would be pivotal to keep your financial assets intact.