Potential Signs of Fraud at Tax Time

Whether you were an early bird this year and filed as soon as you were able, or you'll make an eleventh hour dash for the post office, getting your taxes off to Uncle Sam takes some compilation of your personal records and some careful review to get it right. That's just the kind of seasonal opportunity that thieves and fraudsters live for — including some who cite it as open season: the busiest time on their calendars. We can all use a little help keeping our records and information safe in the race to file and the wait to receive a return that follows. So whether you've already checked the box and are waiting patiently for a big check, or you're still compiling statements, make sure these ideas are a part of your plan.

If you've yet to file, and you're working with a tax preparer, make sure it's one you trust. If you're working with someone for the first time this year, do your homework on them before committing: recommendations of first-hand experience from trusted family and friends can't be beat. Don't be taken in by big promises up front to find later that, when you have questions after filing, their business has folded and they can't be contacted. Preparers should also have — and freely offer up — their valid tax preparer identification numbers, and you can always verify their status with the IRS directory. Consider any professional tax preparer not volunteering this information when asked as a major red flag.

Additionally, make sure that preparers aren't coaxing you into something you're not comfortable with, whether it's requesting that you sign a blank return, pay fees based on a percentage of your refund amount, or suggesting that you direct deposit your refund into an account that isn't yours. Tax preparers also shouldn't imply that they can get you a better refund than last year, or use just your last pay check instead of your full W-2 form. If your preparer employs any of these tactics, it's time to evaluate other options sooner than later.

If you've already filed your return and are patiently awaiting your refund information, know that some filers receive a denial from the IRS stating they've already filed. If this happens to you, it's a reliable indicator that you've become a victim of tax fraud — and someone else has already filed with some of your information. An even earlier indicator may have been a failure to file your tax return online, when the IRS reports that a return has already been filed in association with your Social Security number.

When you receive your refund information via letter from the IRS, you may not learn about the exact discrepancy until you're in direct contact with the IRS. The letter you receive from them could share a variety of possible scenarios each indicating a discrepancy between the records you have and return information they've received. Remember that if you make these discoveries regarding tax fraud that your response should include:

  • Filing a police report
  • Contacting the IRS' Identity Protection unit by phone at 800-908-4490
  • Notifying the credit bureaus and consider adding a fraud alert on your credit reports

Remember that the speed of your response to these signals can make a major difference in the fallout the discovery can have on your life and finances. You're not alone nor the first victim that tax schemers have claimed. Be savvy up front and selective with your information to limit your risk, and when you find a good preparer, keep them in your fold for years to come.