Some proactive steps could help you protect yourself from becoming the next tax ID fraud victim this year.
With the 2021 tax filing season officially underway as of February 12, it’s a great reminder to file your taxes as soon as possible before the April 15 deadline to avoid potentially becoming a victim of fraud.
Specifically, tax ID fraud, which remains an ever-present and widely concerning issue in the U.S. Late last year, the IRS announced it discovered $2.3 billion in such scams for fiscal year 2020 alone. And, with the rise of other types of fraud, such as COVID-19-related scams, 2021 could be an even more opportune time for criminals looking to capitalize on both business and consumer taxpayers.
Here’s Why You Should File Your Taxes Early
To help speed up refund payments during the COVID-19 pandemic, the IRS urges taxpayers to have all of their documents ready to file electronically and with direct deposit set up ahead of time—and for good reason:
Fraudsters can use basic personal information (often found online), your Social Security Number (SSN), and other stolen information (e.g., W-2 tax forms) to file your taxes and route your refunds to their own bank account. Often, victims of such scams find out only after their taxes have been filed either by themselves or a hired preparer, only to receive a letter of rejection from the IRS due to multiple filings.
And, if there’s a tax return to be filed, it could be at risk of tax ID fraud.
“Criminals will go after any tax and personal details they can get their hands on to file illegitimate returns,” notes Kathryn Albright, Global Payments and Deposits Executive with Umpqua Bank, a Portland, Ore.-based institution with $29 billion in assets. “Both businesses and consumers should be on alert for tax ID fraud, because it could really hit anybody who has to file.”
Tips to Avoid Tax ID Fraud
Here are some ways you can help protect yourself from tax ID fraud for this and future tax seasons:
“It’s a good idea to get into the habit every tax season of doing everything you can to file early—and securely,” says Albright. “Start with a checklist, get your documents as soon as they become available, and get your preparation in order at the beginning of January so that you can file early. Then, keep an eye on things, like your credit reports and bank account details, throughout tax season to be sure there’s no unexpected or unusual activity that could be linked to fraud.”
What to Do if You Discover You’re a Victim of Tax ID Fraud
If you make the unfortunate discovery that somebody stole your identity to file your taxes, consider performing the following actions as soon as possible:
Additional Resources
For more information about preventing tax fraud, visit these additional FTC and IRS resources.