MNCPA PERSPECTIVES

5 things you need to know about tax-related identity theft this season

Feb. 27, 2018  |  Carolyn LaViolette

Tax-related identity theft remains a major thorn in the side of Americans, with the IRS preventing 787,000 fraudulent returns in 2016, the most recent year for which data is available.

As identity theft and tax scams grow more sophisticated, it’s important for individuals to stay up to date on how to protect themselves.

To help, the Minnesota Society of Certified Public Accountants (MNCPA) put together a list of five things to understand about tax-related identity theft.

1. What is tax-related identity theft?

Tax-related identity theft is when your name and taxpayer identification number, such as your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), are used to file a fraudulent tax return.

The fraudulent return reports erroneous income and deductions in an attempt to receive a refund from the IRS or state revenue department.

2. Scammers are trying new tactics this year

On Feb. 13, the IRS issued a new scam alert for this year. In the scam, erroneous refunds are deposited into taxpayer bank accounts. Thieves then use a variety of methods to reclaim the refund money, including phone calls claiming they are a collection agency or the IRS.

If you notice a suspicious or unexpected refund delivered to your bank account, or receive a phone call to reclaim a refund, alert the IRS immediately.

Information about the scam and how to report erroneous refunds to the IRS is available on the IRS website.

3. How tax-related identity theft may impact your return

Whether or not you are a victim of tax-related identity theft, it’s possible that refunds from the federal and state governments will take longer to arrive.

“Federal and state agencies are taking more time with their tax return review and audit processes because of the growing number of fraudulent returns filed each year,” said Laura Nickolay, CPA, CFP® with White Oaks Wealth Advisors, Inc. “Returns are going through more testing before being accepted, especially if a large refund is requested.”

If you have been a victim of tax-related identity theft in the past, you will need to file paper tax returns with additional forms to prove your identity.

If your taxes were filed as part of a fraudulent return, you will still receive a refund from the IRS. Additional paperwork and communication with the IRS will be required to get your refund, and it may take six months or longer to arrive.

4. Understand what are legitimate IRS communications

It’s important to know how the IRS will and will not communicate with you if there’s an issue with your tax return.

The IRS will never make initial communication via email, phone, text message or social media. All IRS communication is written and done via mail. You may later speak to an agent on the phone to resolve your issue, but the IRS will not call you to introduce a new issue.

Additional identity theft protection guidelines can also help protect you from tax-related identity theft:

  • Freeze your credit at all four major credit reporting agencies to stop issues before they start.
  • Use ongoing credit monitoring services.
  • Use complicated passwords to secure personal information.
  • Use encrypted websites for online document storage and transmission.
  • Be aware of suspicious phone calls and emails, especially those that request personal information. Don’t click email links or download attachments if you think it’s spam.

If you believe your identity has been stolen, the IRS shares steps to take on its website in its “Taxpayer Guide to Identity Theft.”

5. Working with a certified public accountant (CPA) can help secure your tax return

CPAs take security measures and precautions to protect their clients’ data. They can help securely collect, store and transmit your tax returns to minimize exposure of your information across unsecured networks or theft of documents from your home.

In the event you become a victim of tax-related identity theft, CPAs can help with paperwork and talk to the IRS on your behalf.

Don't have a CPA? Visit CPAmeASAP.com or call 800-331-4288 to connect with a CPA today.

The author wishes to thank Laura Nickolay, CPA, CFP for contributing to this blog post.


Topics: Tax

Carolyn LaViolette

Carolyn LaViolette is the MNCPA’s communications manager, working to enhance members’ professional reputations through content, media relations and public affairs. She is also the MNCPA’s unofficial pianist and has tickled the ivories at multiple MNCPA events. Outside of her love for writing and music, Carolyn spends her time playing with her two daughters, attending Tommie football games with her husband, and memorizing the lyrics to musicals. If you can’t get tickets to Hamilton, she is happy to sing the soundtrack for you. She can be reached at 952-885-5530 or claviolette@mncpa.org.

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