How to Identify the Warning Signs of Tax Refund
As a responsible taxpayer, while you diligently prepare and file your annual tax return, you also must be on alert for tax refund fraud. Don’t reward the bad guys with a fraudulent tax refund using your identity. Learn the warning signs and take action to protect your identity during tax time.
Data breaches in recent years – both large and small - have served millions of personal data points to criminals, including names, addresses, Social Security numbers and email addresses. This type of personal information is valuable during tax season, when attempts are made to use stolen Social Security numbers to file fraudulent tax returns to obtain refunds.
Tax refund identity theft happens when someone uses your personal identifying information, such as your name, date of birth or Social Security number without your permission to commit fraud or other crimes, according to the Internal Revenue Services (IRS) “Taxpayer Guide to Identity Theft.” It does not matter if your legitimate tax return indicates that you owe taxes or that the government owes you a refund.
According to the Internal Revenue Service (IRS), approximately 597,000 taxpayers were victims of tax refund identity theft in 2017, a 32 percent drop from 2016.
“While the declines are promising, taxpayers should remain aware that tax refund identity theft is still possible, even as the IRS plans to roll out additional safeguards for tax filing season,” said Trevor Buxton, certified fraud examiner and fraud awareness manager at PNC Bank.
The most important point every taxpayer needs to remember is that the IRS will first contact you in writing through the United States Postal Service (USPS) – not by telephone, email, or other electronic means.
Learn the Warning Signs
Common warning signs that you may be a victim of tax refund identity theft, include:
- Rejected return: If an identity thief files a fake tax return for a refund, any additional returns filed using the same Social Security number will be rejected. If the IRS or tax preparer notifies you that your return has been rejected due to a previously-filed return under the same Social Security number, you may be a victim. Consider using the IRS online tool, “Where’s My Refund?” to monitor your account and check your tax return’s status.
- Strange wages: Identity thieves will file false tax returns using employer data, which does not match with your true employer. You may be a victim if IRS records indicate you received wages or other income from an employer for whom you did not work.
- Additional collection attempts: The IRS or a tax professional may notify you in writing about additional taxes owed, collection action taken against you or a refund reduction due to unpaid debts known officially as a refund offset. While honest mistakes happen among legitimate taxpayers, it could also indicate a fraudster using your Social Security number.
- Unpaid taxes in your minor child’s name: Identity thieves can use a child’s Social Security number to file fraudulent tax returns and secure fraudulent credit and debt that can often go undetected for years. If you receive an IRS notification about unpaid taxes in your child’s name, it may indicate his or her identity has been stolen. PNC POV offers additional tips on how to protect your child’s identity.
Protect Your Identity
You can take the following measures to protect personal data and reduce the risk of tax refund identity theft:
- File your tax return early before an identity thief has the chance to file a fake one.
- Use security software with firewall and anti-virus protections when accessing the Internet.
- Use strong passwords for online accounts - at least 10 characters, alpha-numeric, mixed case and special characters. Never repeat passwords across multiple accounts.
- Spot and avoid phishing emails, SMiShing text messages and vishing phone calls.
- Never click links or download attachments from suspicious emails.
- Keep your Social Security cards and tax records safe and secure at all times.
PNC offers additional tips on how to protect yourself from identity theft.
Report Tax Refund Identity Theft
If you suspect you are a tax refund identity theft victim, you should take the following actions:
- Respond immediately to a legitimate IRS notice; call the number provided.
- Complete IRS Form 14039 (Identity Theft Affidavit), attach to tax return and mail according to instructions.
Learn more about how to defend yourself against common tax fraud scams »
MOST COMMON TYPES OF IDENTITY THEFT COMPLAINTS
Employment or Tax-related Fraud (34%)
Credit Card Fraud (33%)
Phone or Utilities Fraud (13%)
Despite the IRS strengthening its security, Trevor Buxton says to file early. Identity thieves may attempt to file a bogus tax return in your name.
You may be at increased risk in a year where your income, age or filing status does not require you to file a tax return. Identity thieves may file a phony tax return in your place and collect a fraudulent refund.
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Important Legal Disclosures & Information
1. Key IRS Identity Theft Indicators Continue Dramatic Decline in 2017; Security Summit Marks 2017 Progress Against Identity Theft , Internal Revenue Service, February 2018
These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.
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