How to Avoid Tax Fraud and Identity Theft When E-Filing Your Taxes

Someone said there are two guarantees you can expect in this world: death and taxes. I prefer to be more positive in my expectations, and I generally trust my fellow human beings.

However, I don’t trust blindly. It’s never a bad thing to be aware of what you’re putting out there. By their very nature, tax returns present a tempting target for identity thieves and/or those who might be looking to steal your return out from under you. Tax returns are littered with just the type of personal and financial information that make thieves see dollar signs and opportunity.

For most people who make any income of consequence, filing a tax return is required. So not filing isn’t an option, but what you can do is take steps to make sure only the relevant government authorities get the information. These tips will help prevent you from falling for anything that could put your info in the wrong hands.

Communications Scams

Much of the law is focused around following very formal processes in order to make sure that anyone with any kind of legal issue is notified. It certainly keeps attorneys busy.

Because the filing of tax returns is one such highly prescribed legal process, it follows these very formal notification rules that most of the time require the IRS to do any follow-up that may be necessary by sending you something in the mail. In fact, that’s the way they communicate.

Phone Scams

The IRS is never going to call you to demand you pay your taxes right now via debit or credit card, gift cards, wire transfer, etc. According to the IRS, they generally mail a bill to taxpayers who owed taxes before going any further.

Scammers will pray on whatever they think they know about you. If you’re an immigrant, they may threaten to report you to U.S. Immigration and Customs Enforcement authorities if you don’t immediately pay. They hope that one out of every 50 people they call might have enough concern to stay on the phone with them so they can carry out their scheme.

Don’t give these people the time of day. If you think you may owe taxes, you can give the IRS a call at (800) 829-1040. Taxpayers can also use this IRS tool to view their payment history and current balance, if any.

Email Scams

There are also email versions of these scams where you’re asked to provide personal info, like your Social Security number, in an email. Criminals can do a few things with your Social Security number, including filing your tax return and stealing your refund.

Surprisingly, we consumers actually have more control over whether or not we fall victim to identity theft and tax fraud than we might think.

For starters, don’t ever give out personal information such as your Social Security number over email. If someone actually needs it, there are much better ways of going about sending and receiving that information, such as through a secure webpage. Similarly, no one reputable will ask you to share usernames and passwords to anything. Always be wary of any poor grammar or other items that may indicate a scammer from overseas. Also, be wary of slight variations in email address like PNCBanc.com instead of PNCBank.com. For more information, check out this cyber security post.

If you plan on e-filing your taxes this year, there are a number of relatively simple and easy things you can do to protect your identity – and your money.

Protect Your Information

You can protect your personal information and finances both by monitoring your records and by taking the proper security precautions with your computer. The IRS recommends checking your credit report at least once a year for fraudulent activity.

Create a Strong Username and Password

One of the most important things anyone can do to protect their information when it comes to any online account, but particularly something sensitive like the username and password for your tax preparation program, is to create a particularly strong password. How can you go about doing that? Let’s walk through the process by creating a password.

You want it to be long, but also memorable. For example, I’m a big fan of the band Bowling for Soup. I might use part of their song lyrics. An acquaintance might know I’m a big fan of the band, so to throw them off, I might choose to use a deep cut. Many people don’t know that Bowling for Soup is actually responsible for the theme song for Disney Channel’s “Phineas and Ferb.” One of the lyrics in the song is about giving a monkey a shower and another is about locating Frankenstein’s brain.

Next, we insert some numerals and special characters for good measure. For example, a password might be M0nkey$howerFr4nkensteinBra!n. Beyond that, there are just a couple of things to remember.

• Don’t use names or dates as passwords, and don’t use any combination of characters that a friend or acquaintance could figure out.
• Change your passwords regularly.

If all this sounds like a lot of work, that’s because it can be, particularly if, like most of us, you have 10 different accounts you regularly log into. I recommend using a password manager. I like one called LastPass, but there are several of these that all look very similar to one another. Whenever you register to use a site or change the password for something you already have an account for, it will generate a random password for you of a specified length with the upper and lowercase characters, numerals and special characters.

From then on, you log into your password manager with one (ideally super strong) master password and each time you go to a site where you have an account, your credentials will auto populate so you can login.

You still may use a method similar to the one outlined above if you have a password you need to remember and type in an instance where a password manager won’t help. For example, the password manager won’t work with your Apple TV, so you’ll want a password more memorable for your Netflix account. Remember, you still want this to be reasonably strong because the site may have your credit card info.

Protect Your Computer

Along with protecting your information, you need to protect your computer, too. Make sure to always back up your files, both on your computer and externally. You should also install firewall, anti-spyware and anti-virus software from a reputable company. Both Windows and Mac computers have good anti-virus, anti-spyware and firewall protection built-in. However, be aware that no anti-virus is perfect. You should always carefully scrutinize anything you click.

If it sounds too good to be true, it’s probably a trap. That Russian domain is probably a good vector for a computer virus rather than a source for the high definition copy of “Pitch Perfect.” Sure, you could click, but to borrow from Becca, you’re gonna miss your computer security when it’s gone.

Do You Know Who Is Doing Your Taxes?

The final scam to be worried about is making sure you know who is getting your information. Unscrupulous people will sometimes offer to do your taxes just to get their hands on your information.

If you don’t already have a tax preparer who you regularly work with or someone else you trust, the IRS makes a list of qualified preparers available.

Tax season comes but once a year, and while doing your taxes isn’t necessarily fun, having someone else file tax returns in your name in order to steal your refund is even worse. Staying aware on your computer and a few password improvements are definitely worth it if it means avoiding losing thousands of dollars to thieves.

Have you had an experience with tax fraud, or do you have more questions about it? If you’ve been the victim of identity theft, here are some tips to lessen its financial impact. Let us know in the comments below.

The post How to Avoid Tax Fraud and Identity Theft When E-Filing Your Taxes appeared first on ZING Blog by Quicken Loans.

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