How to Prevent thieves from Stealing Your Tax Refund Before it Hits Your Bank Account

How to Prevent thieves from Stealing Your Tax Refund Before it Hits Your Bank Account

 

 

 

According to the IRS, the average non-business taxpayer spends eight hours and $120 per year preparing their tax return. That’s a lot of time and money to invest in something you probably don’t want to do in the first place. Yet, there’s often a reward for your investment, as many taxpayers get some of their hard-earned money back with a tax refund.

Unfortunately, scammers are well aware of this. In fact, according to a 2012 report from Acting Deputy Inspector General for Audit Michael McKenney, there were over 1.1 million cases of tax refund fraud in 2011 – over 2.5 times the amount in 2010. All a thief needs to run a tax refund scam on you is your social security number, leaving you wondering where your tax refund went.

How does tax refund fraud occur? How can you prevent tax refund scams?

How Tax Refund Fraud Occurs

Tax refund fraud is often perpetrated by identity thieves.

Identity theft comes in various forms. According to the US Department of Justice, these include the following:

  • Dumpster diving: going through your garbage or recycle bins for statements, etc.
  • Shoulder surfing: listening to or watching you as you say or enter information (such as your SSN)
  • Mail interception: stealing mail from your mailbox

Other methods of identity theft include:

  • Phishing: a false website or scam email intended to lure personal information from you
  • Malware: a computer program that you unwittingly download, which then steals your information
  • Good, old-fashioned purse-snatching!

So, a  thief can get his hands on your stolen social security number and other personal information stealthily, by eavesdropping on your phone calls or web surfing, tricking you with a website or email that appears genuine, or through the use of malware. A more retro thief could steal your social security number by rummaging through your garbage, stealing your mail or snatching your purse.

How Identity Thieves Steal Tax Returns

Stealing your social security number is often the hardest task for a tax refund scammer. Now, all he or she has to do is file a tax return in your name, have it sent to a different address (or bank account), and your hard-earned money is gone forever. You’ll just be left wondering, “Where is my tax refund?”

How to Protect Yourself from Tax Refund Scams

The following are some tips to prevent identify theft (and thus tax refund fraud) from happening to you.

Guard Your Social Security Number

Only give your social security number if you’ve initiated a call or are otherwise confident in who you’re dealing with. Also, ask why a business needs your SSN before handing it over. If it is not absolutely required, or you are otherwise uncertain of the requester’s legitimacy, don’t do it.

Monitor Your Credit Report

The IRS recommends checking your credit report every 12 months, reviewing for any activity that is out of place with your financial records or purchases.

Protect Your Computer

Protect your computer with anti-spam/anti-virus software. Keep security patches up-to-date and use a firewall. On this note, change passwords regularly in case a thief steals your existing passwords.

Also, note that the IRS does not request personal or financial information via any electronic means. If you receive an “IRS” email asking for such information, forward it to Phishing@irs.gov.

Secure Physical Files

Anything that has your social security number on it should be stored in a secure location, including tax records from past years. Examples include safes and locked drawers. Shred all documents you no longer need.

Watch Your Wallet (or Purse)

Keep your wallet or purse in sight at all times, even at work. Or, keep it in a secure location, such as a locked desk drawer or gym locker.

Protect Your Identity When Traveling

Have your mail held at your local post office or have a trusted family member, friend or neighbor regularly gather it while you’re away. Also, while traveling (or anytime you leave the house for that matter), only take your social security card with you if you need it. Keep any sensitive materials, including your social security card, locked in a hotel safe when you are away from your room .

If You’re the Victim of a Tax Fraud Scam

If someone steals your personal information, contact the IRS Identity Protection Specialized Unit at 1-800-908-4490. If the thief has already stolen your tax refund or you’ve become a victim of a tax scam, call the IRS at 1-800-829-0433.

Other organizations you may wish to contact include:

  • US Postal Service
  • Social Security Administration
  • Credit reporting companies
  • Financial institutions you do business with

Tax refund scams are just one more way that an identity thief can use your personal information to steal money. By following the tips in this guide, however, you can minimize your vulnerability to tax refund and protect yourself — and your tax refund — from identity theft.