Protect Your Refund: Consumer Advocates Warn Tax Scammers Will Steal Your Identity

It’s that time of year again: tax time. While almost everyone is excited for their well-earned tax return to arrive, there’s a group of people ready to take that money away from you. Thankfully, the National Consumers League wants to make sure consumers don’t fall victim to tax ID thieves.

Identity theft is nothing new. Thieves have been using stolen identities to take out loans and run-up lines of credit, but in recent years thieves have taken to using stolen identities to obtain fraudulent tax refunds, the National Consumers League reports in a recent scam alert.

Generally, tax season identity scams work in two ways: scammers use a stolen Social Security number to file the tax return, or they use the stolen identity to obtain a job. In both cases consumers aren’t likely to discover the problem until much later.

Most consumers who fall victim to tax-time fraud find out when the IRS declines to process a legitimate tax return because a fraudulent one has already been filed in their name.

According to the Federal Trade Commission, nearly half of all identity theft complaints stem from tax-related ID theft. Approximately 1.1 million suspicious tax returns were identified in 2011. Those suspicious returns totaled $3.6 billion in possible fraudulent refunds.

Tax season is also a time when scam artists prey on consumers looking to stay in the good graces of the IRS.

In one possible scenario a scammer will call claiming to be with the IRS and threaten fines or lawsuits if a victim doesn’t immediately wire fund to pay back taxes. The NCL says consumers should simply hang up on these callers.

In the case of an actual tax issue, the IRS will send a notice or letter. The agency will not initiate contact with consumers through email, text messages, or social media.

The NCL urges consumers who think they may have been affected by tax ID theft, or who receive notice from the IRS about a potential return problem, should take the following steps:

  • Contact the IRS’s Identity Protection Specialized Unit at 1-800-908-4490.
  • Put a fraud alert on your credit reports with the three major credit-reporting agencies (Equifax, Experian, TransUnion). When this is done, when someone tries to obtain credit in your name, the business offering credit must contact you to verify your identity.
  • Order your free credits reports for the three major credit-reporting agencies from annualcreditreport.com and check it for errors. If you discover any, dispute them with the reporting agency and the creditor.
  • File an identity theft complaint with the FTC and save or print the Identity Theft Affidavit that you receive at the end of the process.
  • File a report with your local police department and keep a copy of the report on file.

For more information and answers to tax season questions visit Consumerist’s Tax Dad:

Ask Tax Dad: Disabled Veterans, Commuting Actors, And Depreciating Dishwashers
Ask Tax Dad: Invasion Of The Dependent Relatives
Ask Tax Dad: How Do I E-File? What’s A Deduction, Anyway?
Ask Tax Dad: Micro-Business, Rental Home, Deadbeat Ex, And Government Shutdown
Ask Tax Dad: Send Us Your Questions For Consumerist’s Tax Columnist

Tax time open season for ID thieves and IRS impersonators [National Consumers League]