How to Prevent Tax Identity Theft (5 Must-Do Tips)

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Clock, pen and taxes on a desk Filing taxes is already stressful, but what if you hit “submit” and find out that someone has already filed a fraudulent tax return in your name? Chaos ensues, and you don’t know how this could’ve happened.

Unfortunately, this is exactly what millions of Americans experience every tax season. Did you know there are ways to prevent this?

How To Prevent Tax Identity Theft

In 2013, the IRS prevented $24.2 billion in tax return fraud requests but paid out $5.8 billion. For those who had their identities used for tax refund fraud, it took an average of 18 weeks to receive their tax refunds.

The best way to avoid false tax return identity theft is to be vigilant starting now. Follow these tips below to do your best to protect your identity.

1. File Your Taxes Early

The sooner you file your taxes the least likely someone else has already used your social security number (SSN) to file a fraudulent tax return. Filing sooner than April is also convenient because the earlier you file, the sooner you get your refund back (if you’re getting one).

2. Share Your Personal Information Cautiously

Be vigilant about who you share your personal information with and how you do so. For example, you don’t need to share your address on social media platforms like Twitter and Facebook. Never share a password with someone over email, and don’t share your social security number with the cashier at the store.

Sometimes you obviously need to share your personal information with professionals. For example, sharing your SSN with your tax professional is necessary. When my tax professional asked for my SSN, he had me write it on a sticky note, so I didn’t have to say it out loud and risk someone overhearing me (even though we were in his private office). He then shredded the sticky note, so that no one could snatch it up.

Items to be careful sharing with others:

  • SSN
  • Driver’s license
  • Birthdate
  • Address
  • Bank account information
  • Credit/debit card details
  • Passwords

3. Use a Shredder

Per the accountant’s example above, use a paper shredder for any paperwork you are recycling that has any personal information on it.

Things you should shred:

  • Bank statements
  • Insurance papers
  • Pay stubs
  • Medical records
  • Social security statements
  • Retirement documents
  • Anything with your:
    • Name
    • Address
    • Phone number
    • SSN
    • Bank account information

4. Don’t Email Attachments Containing Important Information

Don’t share your 1099’s, W2’s, previous returns, and any other tax-related documents via email. If you need to share these documents with your accountant, provide the printouts by handing them off in person or upload them to a secure 3rd party service that is password protected and ideally, has 2 factor authorization (2FA) set up.

5. Use a VPN

A VPN masks your online use from potential hackers by creating a secure, encrypted connection that lets you file your taxes online without risk. VPN services also hide your location and internet history from companies tracking your data. Checkout the best VPN’s in a comprehensive review on our sister site, Safe Smart Living.

More Tips to Avoid Tax Fraud Identity Theft

Watch this video from H&R Block’s President and CEO which discusses how you can avoid tax ID theft. H&R Block is one of our top picks for best online tax software.

Tax Fraud Identity Theft Is Expensive to Victims

If you are a victim of tax ID theft, the cost of recovering your identity can be rather expensive.

Costs include:

  • Replacement of stolen items or money
  • Attorney fees
  • ID replacement
  • Lost wages
  • Mail charges
  • Phone call expenses

Not to mention all the wasted time you’ll spend recovering your identity.

Has Your Identity Been Stolen?

First of all, we are so sorry to hear that your identity has been stolen. You have a long road ahead of you, but it’s not impossible, and you can take your identity back. Find out what you should do when someone steals your identity.

What tips do you have for avoiding a fraudulent tax return?

Kimberly has always enjoyed testing out the latest tech gadgets and loves seeing how things evolve. She’s a fast learner when it comes to the latest fads and likes sharing her findings with others. Although she loves technology, she also enjoys escaping the online world and likes to spend time outside away from the gadgets.

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