I have enjoyed the guest posts for this blog while I’ve been adjusting my schedule. There are still a few more coming your way. Today’s guest post is from Carrie at SpendOnLife.com.
Filing a tax return ranks about a 1.5 on the “Fun” scale for most of us, and that’s only if there’s a refund check waiting on the other end. But add a case of stolen identity into the mix, and tax season quickly becomes an absolute nightmare.
Why Identity Thieves Target Your Taxes
Your tax return is a virtual jackpot for identity thieves. It contains more personal information about you and your family than any other paperwork, purse, or wallet. Each year’s tax file is a neat little package containing your Social Security number, address, date of birth, and W-2 broadcasting your employment and income information. Tax files also often include receipts and credit card statements, and bank account information.
Thieves can open new credit and loans in your name
Your tax paperwork contains enough information for an experienced identity thief to apply for new credit cards, loans, and even utility or cell phone services in your name. They quickly run up the bills on these accounts, and never pay them down. After awhile, banks and debt collectors come knocking on your door expecting payment, even though you knew nothing about the accounts!
Thieves can sell your information on the black market
Many thieves make money simply by gathering your personal information and selling it—usually bundled with hoards of other stolen data—to organized crime rings and other identity thieves. Your identity is worth anywhere from $10 to $400 on the black market, depending on how many pieces it includes (bank account numbers coupled with passwords are the most valued commodity).
Thieves can pretend to be you to the IRS
Imagine getting a letter from the IRS that says the tax return you spent hours preparing and filing is invalid—someone has already submitted one using your Social Security number. And the refund check you were anxiously awaiting? Well, that was diverted into a different account using a wire transfer. The account is by then closed and the identity thief nowhere to be found.
Other fraudsters can skip out on paying their taxes by giving your Social Security number to their employer. Their employer then reports the income earned under your SSN to the IRS, making it appear as though you owe more taxes than you actually do. If this happens, you will likely get a letter from the IRS stating that you owe additional taxes that you did not report on your return.
Cases like this are becoming so prevalent that the IRS has actually set up an Identity Protection Specialized Unit. If you get a letter from the IRS stating that someone has already filed a return in your name or that you owe taxes on income that you never earned, contact the specialized IRS hotline at 1-800-908-4490.
Ways to Protect Yourself
Taking a few precautionary steps can really help keep the identity thieves away from your doorstep. The advice below is pertinent year-round, not just during tax time, and should be applied to all of your sensitive personal and financial data.
Protect your paperwork
Is your tax paperwork safe? Or do you keep it in an unlocked file drawer somewhere, or worse, in a cardboard box marked “Taxes” in your garage?
Identity thieves will go to great lengths to rip off your personal data. Emptying your mailbox, digging through your trash, and smashing a car window to get to your tax paperwork are all in a day’s work.
Consider getting a locked mailbox or P.O. box to keep mail secure, and drop off your tax return in a secured U.S. collection box or at the post office. Shred everything containing your personal information before throwing it away, ideally with a cross-cut shredder. Keep past years’ taxes somewhere safe, preferably under lock and key.
Make sure anyone who helps you prepare your taxes is trustworthy and takes caution with your sensitive information. Your dad may be a whiz at helping you find extra tax deductions, but if he’s careless with your tax file, he isn’t doing you any favors.
IRS spokesperson Jodie Reynolds says to “make sure you’ve got someone who’s legitimate, a tax professional who signs the return and provides a copy for your records. Don’t sign a blank tax form, and be sure to know the credentials of your tax preparer and know whether they’re an attorney or an accountant.” Ask what precautions they take with your information, and who else in their office handles your tax files.
Beware of phone and email scams
Phone calls and e-mails from supposed IRS representatives also peak during tax season. Through these “phishing” e-mails and calls, fraudsters attempt to solicit personal details in an effort to “send the stimulus check to the right address” or “know which account to deposit the tax rebate.”
Know that the IRS will never call or e-mail you for personal information. If you think a caller might be trying to scam you, ask them for a phone number to call them back the next day. A scammer will most likely hang up at that point. If you get an email from someone claiming to be with the IRS, don’t reply to it, don’t download its attachment, and don’t click on links in the e-mail. Instead, report the fraud to the IRS by forwarding the email to firstname.lastname@example.org.
Protect your computer
Don’t assume that the files you store on your computer—including your electronic tax return—are private. Your cozy home office might feel cut off from the rest of the world, but hackers are increasingly crafty in finding ways to access your system.
To protect yourself from “malware” (viruses and spyware to steal personal information, send spam and commit fraud), make sure your spyware and anti-virus software is up to date. Make sure you are running the latest version of your internet browser.
Run a scan for viruses and spyware before you file your taxes electronically. Use a password to protect all your tax return files. After filing, save sensitive documents to a removable disk or external hard drive. Do not leave tax files on your computer.
For information on securing your computer, visit the Federal Trade Commission site onguardonline.gov/index.html.
Check your credit regularly
If you think your personal information has been compromised, be proactive. Check your credit report regularly for signs of unauthorized activity. Better yet, sign up for a credit monitoring service which sends you an alert as soon as an identity thief tries to apply for credit or take out a loan in your name. The sooner you know about the identity theft, the sooner you can put an end to the crime.
Carrie is a columnist for the blog on SpendOnLife.com, a website that educates consumers about credit reporting and identity theft. She writes about personal finance and credit-related topics. Recent posts discuss ways to reduce your debt, staying afloat during the recession, and major developments by both the credit card industry and government that affect American consumers. She has more than 10 years of print and online publishing experience.