Navigating Tax Season: Protecting Yourself from Identity Theft

Tax season, while a time for financial reconciliation, unfortunately also ushers in a heightened risk of identity theft. Cybercriminals and fraudsters become increasingly active, attempting to exploit individuals' eagerness to file or their anxieties about taxes. Understanding the common tactics used by these criminals and implementing proactive protective measures are essential to safeguarding your personal and financial information.

The Landscape of Tax Season Scams

Fraudsters employ a variety of sophisticated methods to steal your identity and financial data during tax season. These often include:

• Phishing Scams: You might receive unsolicited emails, text messages, or phone calls seemingly from the IRS or a tax preparation service. These communications often contain urgent requests for personal information, threaten audits, or promise large refunds to lure you into clicking malicious links or divulging sensitive data.
• Impersonation Scams: Criminals may impersonate IRS agents, demanding immediate payment for "back taxes" or threatening arrest. They often use aggressive and intimidating language to pressure victims into making hasty decisions.
• Fake Tax Preparers: Be wary of individuals or services promising unusually large refunds or operating without proper credentials. These fraudsters may steal your information or even file false returns on your behalf.
• Malware and Ransomware: Malicious software can be spread through infected attachments in fake tax-related emails. Once installed, it can steal your data or lock your computer until a ransom is paid.
• Stolen Refund Checks: While less common now with direct deposit, criminals can still attempt to intercept mailed refund checks.
• Social Media Scams: Fraudsters may use social media platforms to spread misinformation, create fake IRS profiles, or directly target individuals with phishing attempts.

Why Tax Season is Prime Time for Identity Theft

The convergence of several factors makes tax season particularly attractive to identity thieves:

• Urgency: The looming tax deadline creates a sense of urgency, making individuals more susceptible to high-pressure tactics.
• Information Exchange: This is a period when people are actively gathering and sharing sensitive financial information, including Social Security numbers, bank account details, and income figures.
• IRS Impersonation Credibility: The inherent authority of the IRS makes impersonation a powerful tool for scammers.
• Volume of Communication: The sheer volume of legitimate tax-related communications makes it easier for fraudulent messages to blend in.

Essential Steps to Protect Yourself

Protecting your identity during tax season requires vigilance and proactive measures. Here are key strategies:

• Be Skeptical of Unsolicited Communications: The IRS generally initiates contact via postal mail. They will never demand immediate payment over the phone, threaten arrest, or ask for credit card or debit card numbers over the phone or email.
• Verify the Sender: If you receive a suspicious email or text message, do not click on any links or open attachments. Instead, directly navigate to the official IRS website (irs.gov) or contact your tax preparer using a verified phone number.
• Use Strong, Unique Passwords: Ensure all your online accounts, especially those related to finances and taxes, have strong, unique passwords. Consider using a password manager.
• Enable Two-Factor Authentication (2FA): Whenever possible, activate 2FA on your online accounts. This adds an extra layer of security by requiring a second form of verification (like a code sent to your phone) in addition to your password.1
• File Early: Filing your tax return as soon as you have all your necessary documents can reduce the window of opportunity for a fraudster to file a return in your name.
• Secure Your Personal Information:
• Shred financial documents before discarding them.
• Avoid carrying your Social Security card unless absolutely necessary.
• Be cautious about sharing personal information on social media.
• Monitor Your Financial Accounts: Regularly check your bank and credit card statements for any suspicious activity.
• Order Your Free Credit Report: You are entitled to a free credit report annually from each of the three major credit bureaus (Equifax, Experian, and TransUnion) via AnnualCreditReport.com.2 Review it for any accounts or inquiries you don't recognize.
• Use Reputable Tax Preparers: If you use a tax preparer, ensure they are reputable, have a Preparer Tax Identification Number (PTIN), and are properly licensed.
• Update Your Software: Keep your operating system, web browser, and antivirus software up to date.
• Consider an Identity Theft Protection Service: These services can monitor your personal information and alert you to potential fraud.

What to Do if You Suspect Identity Theft

If you believe you have been a victim of tax-related identity theft:

1. Contact the IRS: Report the incident to the IRS immediately by calling their dedicated Identity Protection Specialized Unit.
2. File a Police Report: File a report with your local police department. Get a copy of the report, as you may need it for other actions.
3. Contact Credit Bureaus: Place a fraud alert on your credit reports with all three major credit bureaus. Consider freezing your credit if the theft is significant.
4. Close Compromised Accounts: Close any financial accounts that you believe have been compromised.
5. Change Passwords: Change all your passwords for online accounts.

By remaining vigilant and implementing these protective measures, you can significantly reduce your risk of becoming a victim of identity theft during tax season and beyond.

Disclosures:

This content is provided for informational purposes only and should not be construed as legal, tax, or investment advice. Always consult3 with a qualified attorney, tax professional, or financial advisor regarding your unique circumstances before making decisions related to estate planning.

INPAC Wealth Advisors is not a law firm and does not provide legal advice. The information provided herein is based on current laws and regulations as of the date of publication, which are subject to change.