Criminals who use stolen personally identifiable information can launch a wide variety of fraudulent financial schemes, such as hacking online accounts, submitting phony insurance claims, and applying for loans and credit cards to pad their bank accounts. Increasingly, though, identity theft through tax refund fraud is becoming a favorite money-making scheme for criminals.
There have been a number of stories in recent months of identity theft and how the information can be used against individuals. Because identity theft through tax refund fraud has become the most popular tax scam around, you might even know someone who has been a victim of it. All that is needed is a computer (or even a cell phone with the necessary app) and someone’s Social Security number (SSN) and date of birth.
This fraud is so rampant that the U.S. Internal Revenue Service (IRS) estimates that it mistakenly paid $5.2 billion to identity thieves in 2013, according to a report by the Government Accountability Office (GAO). The fraudsters filed fraudulent tax returns on behalf of millions of unsuspecting taxpayers, and the IRS did not catch the scheme until well after the refund checks had been processed. However, the financial damage could have been far worse: The IRS also estimates that it was able to identify and stop $24.2 billion in attempted identity theft tax refund fraud last year.
Ways to Protect Your Identity
Although identity theft is difficult to completely guard against, there are steps you can take to make it challenging for criminals to steal personally identifiable information, including:
- Regularly check your credit report.
- Do not carry a Social Security card or any documentation containing your SSN.
- Properly dispose of documentation containing sensitive information; shred it instead of leaving it in the trash.
- Only give personal information when absolutely necessary — especially on websites and via social media — and keep track of those who have access to it (this might be helpful in determining the breach source if victimized).
- Never use public Wi-Fi or a non-password-protected network to file electronically.
- Protect personal laptops and devices by installing firewalls and the most recent anti-virus software.
- File taxes as early as possible during tax season because criminals try to file fraudulent returns before the actual filer (once the IRS receives a return with an SSN, the agency will reject any duplicate filings and immediately notify you).
- If filing taxes is not required, consider doing so anyway to prevent a criminal from submitting a false return in your name, and to be alerted if someone has already filed in your name.
- Be leery of phone calls from people who already know your SSN and claim to be IRS agents. Some even manipulate caller ID. (The IRS warned of this sophistication last October.)