Tax season is here, which also means it's tax fraud season. Scammers love this time of year because they have the opportunity to take advantage of honest taxpayers and steal their refunds, as well as their personal information. According to the IRS, thousands of people fall victim to tax-related fraud each year, resulting in a loss of millions of dollars.
While no scam is completely avoidable, you can protect yourself from becoming a victim if you know what to look for. Learn more about some of the most common tax season scams and how to spot them.
Tax Refund Fraud
This type of fraud occurs when a scammer uses your information to file an early tax return in your name and steal your refund. All the scammer needs to commit tax refund fraud is your name, Social Security number and birthdate.
How to spot it
Tax refund fraud can be difficult to spot before the fraud occurs. Many times, you won't find out until you try to file your tax return online and it gets rejected because someone has already filed in your name. Filing your taxes early in the season is one of the best ways to stay ahead of the scammers and keep your refund out of the wrong hands.
Employment-Related Identity Theft
If someone has your Social Security number, they could use it for employment purposes. For example, someone with a criminal history can use your stolen Social Security and their own information to apply for a job and earn money. Since this type of identity theft doesn't cause any immediate financial problems for victims, it may be difficult to identify until tax season rolls around.
How to spot it
You might not realize someone is using your SSN for employment reasons until you receive tax information for a job you didn't have or wages you didn't earn. For example, an employer you don't recognize sends you a tax document like a W2 or Form 1099. Or, you get a request from the IRS asking you to verify unreported income. Here's a complete list detailing the signs of employment-related identity theft.
IRS Imposter Scams
One of the most common ways scammers target taxpayers is by posing as IRS officials and demanding payment or personal information. The scammer may use an urgent or threatening tone, making the victim believe they have to do what they're told, or they'll face legal problems or criminal charges. This scam can be carried out via phone call, email, text message or even on social media channels.
How to spot it
If you receive communication that appears to be from the IRS, be alert. Remember that the IRS does not initiate contact with taxpayers via phone call, email, text or social media to request personal or financial information. Generally, they will first send a letter in the mail if you owe taxes. If you're unsure, don't give out any information. Instead, call the IRS directly at (800) 829-1040 to verify.
What to do if you're a victim of tax fraud
- File a police report and report the fraud to the Federal Trade Commission at identitytheft.gov or call the FTC Identity Theft Hotline at 1-877-438-4338.
- Contact the IRS' Identity Protection unit at 800-908-4490.
- Request a fraud alert on your credit report. Contact one of the three major credit reporting agencies (Equifax, Experian or TransUnion) and ask them to put a fraud alert on your credit records. You can also request a credit freeze, which will stop any new credit accounts from being opened in your name.
Tax fraud can happen at any time of the year, not just during tax season. That's why Wright-Patt Credit Union is here to help you protect your personal and financial information year-round. For more fraud prevention tips, tools and resources, visit WPCU.coop/StopFraud.