Tax Season Can Also Mean Tax Identity Theft – How You Can Protect Yourself

Question

“With all of the data breach stories hitting the news lately, I’m getting nervous about filing my taxes. How can I make sure that my personal data and information is kept safe?” — Reggie from Detroit, MI

Answer

Tax time is here, and with that certainly comes the increased risk of identity theft. The IRS estimates that identity thieves filed 1.5 million fraudulent tax returns in 2012, pocketing more than $5 billion in refunds from unsuspecting taxpayers. With national news reporting about computer hackers stealing customer data from retailers, it is more important than ever for us to safeguard our personal and financial information.

You may not even know that you are a victim until it’s too late! Studies show that identity theft is typically discovered 14 months after the crime actually occurred. Many people only realize that they have been a victim of fraud when they prepare and submit their federal tax return.

The best way to avoid identity theft is to prevent it before it happens. Consider the following steps to reduce the chance of becoming a victim of identity theft:

1. Use a reputable, licensed tax preparation professional or software product (such as www.MyFreeTaxes.com if you qualify).
2. Review your credit reports by ordering a free copy from each of the three credit bureaus (Equifax, TransUnion and Experian) at www.annualcreditreport.com or (877) 322-8228.
3. Put a credit freeze on your credit reports, which locks your credit report; only you can provide permission to the credit bureau to release your information.
4. Shred all documents that have your personal or financial information on them before discarding.
5. Do not give out personal or financial information to anyone that you do not know or trust.
6. Avoid using easily accessible information, such as your birthdate or mother’s maiden name, as passwords for personal and financial accounts.
7. Do not click on any links or pop-up ads that look suspicious or that are part of unsolicited emails.

If you have been a victim of identity theft, or suspect that you or someone you know may be a victim:

1. Contact the fraud department of each of the three credit bureaus to place a fraud alert on your credit reports.
2. File a report with your local police department.
3. When filing your federal tax return, complete IRS Form 14039 – Identity Theft Affidavit – which will alert the IRS that you have been a victim of identity theft.
4. Close your existing personal and financial accounts and open new ones (including credit cards, bank accounts, phone companies, utilities and other entities with which you conduct business).

Tax returns in particular can be a treasure trove of personal information for identity thieves. To learn more about protecting oneself, or what people should do if they suspect they have become a victim of identity theft, please review the IRS Identity Protection website at http://www.irs.gov/uac/Identity-Protection.