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Steps To Avoid Tax Return Identity Fraud

Identity theft associated with tax returns continues to be a huge headache for taxpayers. Tax related identity theft happens when someone steals your personal information, including social security number to file a fraudulent tax return in order to claim a refund. According to the recent 2023 National Taxpayer Advocate Annual Report to Congress, identity theft victims filed 294,138 individual cases with the IRS. This is up from 228,383 in 2022 and 92,631 in 2019. Unfortunately, the IRS processing time of tax returns of identity theft victims has also increased with victims generally waiting an average of 19 months for the IRS to process their returns and issue a refund.

Below are suggested steps taxpayers can take to help avoid a tax related identity theft:

  1. File your tax return as early as possible. The IRS will only accept one tax return per Social Security Number. Therefore, filing your tax return as early as possible ahead of the tax filing deadline of April 15 minimizes the risk of a fraudster filing a false tax return on your behalf. The IRS will begin accepting and processing 2023 tax returns on January 29, 2024. Of course, you will need all of your income related tax documents before you can file a return.
  2. Obtain an Identity Protection PIN (IP PIN) from the IRS. The IRS opened up its IRS IP PIN program in 2021 allowing all taxpayers to verify their identities by establishing a six-digit code with the IRS. Your IP PIN code is only known by you and the IRS and allows the IRS to authenticate your identity when filing your tax return. An IP PIN is only valid for one year and must be generated each year. An IP PIN can be used for both e-file and paper returns.
  3. Request your refund as a direct deposit. Request the IRS to make your refund as a direct deposit so a fraudster can’t steal it from your mailbox or to have it redirected to a different address.
  4. Protect your personal information. Take steps to protect your personal information. The IRS suggested tips include using security software, including virus/malware protection and a firewall, encryption of sensitive data, using strong, unique passwords, always use multi-factor identification when available.
  5. Be weary of phishing and email scams. Fraudsters often use phishing or other email scams to trick you into providing them with your personal information. Your best defense is not to respond to emails that ask for your personal information. If you believe the request is legitimate, contact the sender by phone or through their website that you know is real. Visit the Federal Trade Commission’s site for advice as to how to recognize and avoid phishing and email scams.

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