Tax Identity Theft: What You Need To Know For 2023

Tax identity theft is on the rise, with thieves using stolen personal information to file fraudulent tax returns and claim refunds. According to the IRS, tax identity theft impacted over 2 million Americans in 2022, and the numbers are expected to rise in 2023.

How Tax Identity Theft Occurs

Thieves get your personal information like your name, Social Security number, address and birthdate through methods such as:

Stealing wallets and mail: Thieves steal wallets, bank statements, tax documents and other mail to get sensitive data.

Hacking computers: Thieves hack into computers and servers to gain access to personal information. Phishing emails with malicious links or attachments are a common tactic.

Scamming individuals: Thieves call, email or text pretending to be from companies like the IRS, tax software providers or credit bureaus to trick people into providing personal details.

Data breaches: When companies or organizations suffer data breaches, personal information can end up for sale on the dark web where thieves purchase and use it.

Public records: Thieves access personal information found in public records and online profiles from sources like social media platforms, public databases and ancestry websites.

With information in hand, thieves then use victims’ names and Social Security numbers to file fraudulent tax returns, claiming refunds and committing other crimes like opening credit cards.

Signs You May Be a Victim

There are a few warnings that may indicate you have become a target of tax identity theft:

•Your tax return is rejected because one was already filed using your information.

•You receive a notice from the IRS indicating you have additional income or tax liability not reported on your actual filed return.

•Your expected tax refund never arrives.

•Collection notices are sent to you for taxes you didn’t actually owe.

•You detect unknown activity in your financial accounts like unauthorized use of your Social Security number to gain employment or open credit cards.

Tax Identity Theft: Most Q&A for 2023

Tax identity theft is on the rise, with thieves using stolen personal information to file fraudulent tax returns and claim refunds. Here are 10 things you should know about tax identity theft in 2023:

  1. What is tax identity theft? Tax identity theft happens when someone steals your personal information like your Social Security number to file a fraudulent tax return in your name to claim your refund.
  2. How common is tax identity theft? The IRS has seen a surge in tax identity theft in recent years. In 2023, the IRS expects tax identity theft to impact over 2 million Americans.
  3. How do thieves steal identities? Thieves get your information by stealing wallets and mail, hacking computers, and scamming individuals for information. They then use it to file false tax returns.
  4. What information do thieves target? Thieves look for full names, birthdates, Social Security numbers, addresses, bank account numbers, and other financial data.
  5. How can I tell if I’m a victim? Watch for signs like rejection of your tax return, notices that your return has already been filed, refunds that don’t arrive, or IRS notices showing income you didn’t earn.
  6. What should I do if my identity is stolen? File a police report, contact credit bureaus to request fraud alerts and credit freezes, file a complaint with FTC, and contact the IRS Identity Protection Specialized Unit.
  7. How can I prevent tax identity theft? Shred sensitive documents, protect personal information online and on devices, use strong and unique passwords, be wary of phishing emails and malicious links, and file your tax return as early as possible.
  8. Should I worry if I haven’t filed yet this year? While filing early is best, don’t panic if you haven’t filed yet. Just take extra precautions reviewing returns for errors, and be on alert for signs of fraud if issues arise.
  9. What is the IRS doing? The IRS has strengthened security with fraud filters, authentication processes and prevention partnerships with companies and banks. But thieves continue to adapt, so individuals must remain vigilant.
  10. What tax software is safest? Major tax software providers like TurboTax and H&R Block use security encryption and IRS-approved fraud protection. But no method is 100% foolproof, so safe computing practices are still important.

Preventing Tax Identity Theft

Here are some important tips to help prevent tax identity theft:

File your tax return as early as possible. Filing early helps prevent thieves from filing a fraudulent return in your name first.

Use a secure internet connection. Public Wi-Fi networks are not safe for transmitting personal or financial information. Always use a secured private network.

Use tax preparation software with multi-factor authentication. Products like TurboTax and H&R Block offer enhanced security options like multi-factor authentication which helps verify your identity.

Be wary of phishing emails and malicious links. Never click links or download attachments from unsolicited messages claiming to be from the IRS, tax software companies or credit bureaus. These can contain malware to steal your data.

Shred sensitive documents. Shred documents like tax returns, financial statements, and receipts to prevent thieves from obtaining your personal details from the trash.

Use strong and unique passwords. Use different complex passwords for your tax software, online accounts and email. Never reuse the same password across multiple websites.

Be cautious of public information. Be careful what personal information you share on social media platforms. This data can be seen by thieves trolling for tax fraud victims.

Monitor for signs of fraud. Check that your tax transcripts and returns match, ensure your refunds are deposited as expected and keep an eye out for unsolicited tax notices which could indicate theft.

Place fraud alerts and credit freezes. Put fraud alerts or credit freezes on your credit reports to avoid thieves opening new accounts in your name using stolen information.

Report any suspected fraud immediately. If you suspect you have become a victim of identity theft, contact the IRS identity theft helpline and file a police report right away. The faster you act the less damage can be done.

Staying vigilant and taking proactive precautions is the best defense against tax identity theft. While the IRS is working hard to clamp down on fraud, individuals must also take an active role in protecting their personal and financial data. Following these tips can help reduce your risk and give you peace of mind this tax season.

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