Filing tax returns can be like getting a root canal without anesthetics. Of course, as Al Capone once showed us, failing to file tax returns can be problematic as well.
Unfortunately, there’s always a spike in tax fraud and tax-related identity theft during tax season, and many people aren’t aware or don’t take the easy precautions to safeguard against these crimes.
Tax Fraud and Identify Theft
There are several different types of tax fraud. In phone scams, you’ll get a call from someone claiming to be with the IRS and demanding you pay the back taxes you owe. They’ll threaten to involve the FBI or other authorities if you don’t immediately pay. In another version of this scam, they’ll call and tell you that you’re owed a refund and they need some personal information to send you the money.
There are also email versions of these scams where you’re asked to provide personal info, like your Social Security number, in an email. Criminals can do a few things with your Social Security number, including filing your tax return and stealing your refund.
Surprisingly, we consumers actually have more control over whether or not we fall victim to identity theft and tax fraud than we might think.
Last tax season, Experian released a report that found most people don’t take the simple steps necessary to securely file their taxes.
“Even though the concern over tax fraud has grown significantly, a majority of survey respondents aren’t planning to take the IRS recommended steps to protect themselves,” the report states. “Only 12 percent are planning to check their credit report, an important first step in monitoring for fraudulent activity that could indicate identity theft. Also, a mere 6 percent will file their taxes on a computer with up-to-date antivirus software.”
If you plan on e-filing your taxes this year, there are a number of relatively simple and easy things you can do to protect your identity – and your money.
Protect Your Information
You can protect your personal information and finances both by monitoring your records and by taking the proper security precautions with your computer. The IRS recommends checking your credit report at least once a year for fraudulent activity.
Create a Strong Username and Password
TurboTax lists several steps you can take to create a strong username and password to protect your account:
- “Use syllables or acronyms. Avoid using complete words that appear in any dictionary regardless of the language,” TurboTax explains. “One option is to start with the first letters of a familiar phrase. For example, ‘Mary had a little lamb’ becomes ‘Mhall,’ which could be part of a secure password.”
- TurboTax also recommends using “a combination of upper and lower case letters, numbers, and punctuation/special characters, such as &^$#.”
- Never use a Social Security number as a username or password.
- Use a different password for each online account.
- Don’t use names or dates as passwords, and don’t use any combination of characters that a friend or acquaintance could figure out.
- Change your passwords regularly.
Protect Your Computer
Along with protecting your information, you need to protect your computer, too. Make sure to always back up your files, both on your computer and externally. You should also install a firewall, anti-spyware and anti-virus software from a reputable company.
Tax season comes but once a year, and while doing your taxes isn’t necessarily fun, having someone else file tax returns in your name in order to steal your refund is even worse. Just $50 worth of security software and a few password improvements are definitely worth it if it means avoiding losing thousands of dollars to thieves.
Have you had an experience with tax fraud, or do you have more questions about it? Let us know in the comments below.
If so, subscribe now for tips on home, money, and life delivered straight to your inbox.