How to protect yourself from tax refund fraud

Tax season scams are always a threat. But over the last four years, with the COVID-19 pandemic and all its fallout, identity thieves have become even more emboldened to commit tax and benefits fraud. And are finding news ways to do it all the time.

You can take steps now to protect your identity as well as any tax refunds due to you.

The first step is to get educated about how tax identity theft works, ways you can reduce your chances of tax identity theft, and steps you can take if you’re a victim of tax identity theft.

How tax identity theft works

The mechanics of tax identity theft are fairly simple.

• Identity thieves obtain sensitive information about you — including your name, address, and personal tax identification number or Social Security number (SSN). They can either buy the information from criminal sources or trick you into giving it to them through phishing or phone scams.
• Fraudsters use your data to file a tax return using a false address or post office box and wait for the refund check to roll in.

If the Internal Revenue Service (IRS) fails to identify the fraudulent return and sends a check to the fraudsters, then instead of a refund, victims receive a notification that their return already has been filed.

Some warning signs of tax identity theft

You may be a victim of tax return fraud when the IRS or another taxing authority:

• Rejects your attempt to file your tax return.
• Requests verification of your identity, indicating something may be amiss.
• Receives income reported by two or more employers, For example, if an employer reports a fraudster’s income under your tax identification number or SSN, your return could be flagged for failing to pay sufficient taxes on wages or to report all wages.

Prevention is the first step

Filing your tax return early is the best thing you can do to reduce the chance of becoming a tax fraud victim. This reduces the chance that crooks will file ahead of you in your name.

The IRS' Identity Protection PIN Opt-In Program is available to all taxpayers who can verify their identities. The Identity Protection PIN (IP PIN) is a six-digit code you establish with the IRS that is only known by the agency and you.

The IP PIN provides another way for you to prevent identity thieves from filing fraudulent tax returns using your personal information. The IP PIN is valid for one calendar year, so mark your calendar to obtain a new one at the start of each year.

And remember, the IRS initiates most contacts with regular mail delivered by the U.S. Postal Service.

The agency will never text you or contact you through social media. They also will never ask for a credit or debit card number over the phone or demand immediate payment.

Seven recovery steps for tax-identity theft victims

If you are a victim of tax-related identity theft, there are steps you can take.

1. Submit an Identity Theft Affidavit using IRS Form 14039.
2. Continue to file your tax return. If your electronic submission is rejected, use a paper form and attach the Identity Theft Affidavit.
3. Respond promptly to IRS correspondence regarding the fraud.
4. Keep records of all of your correspondence and filings.
5. Place a fraud alert with at least one of the three major credit bureaus (Experian, Trans Union, or Equifax).
6. Consider freezing your credit with each of the three credit bureaus.

The IRS has a help page with information and steps you should take if you're a victim of a tax-related cybercrime.

The information included here was obtained from sources believed to be reliable, however, Grinnell Mutual Reinsurance Company and its employees make no guarantee of results and assume no liability in connection with any training, materials, suggestions, or information provided. It is the user’s responsibility to confirm compliance with any applicable local, state, or federal regulations. Information obtained from or via Grinnell Mutual Reinsurance Company should not be used as the basis for legal advice or other advice.

2/2024