$200 billion was the cost of identity theft last year, so how can you guard against tax fraud?

$200 billion was the cost of identity theft last year, so how can you guard against tax fraud
(Image credit: Getty)

Americans have been urged to be on their guard against scammers after it was revealed over $200 billion had been lost to identity theft and tax scams in the past year. Unemployment fraud was overwhelmingly the biggest problem facing the authorities and unsuspecting Americans, and accounted for most of the missing money, while the not-insubstantial amount of $4.2 billion was lost to online scams. 

And with tax season usually the prime time for unfortunate filers to uncover identity theft, including unemployment fraud which can result in tax complications and additional identity theft, another $2.3 billion fell into unscrupulous hands because of tax identity theft. Even pandemic-related relief measures such as stimulus checks have been taken advantage of at a cost of $370 million. 

How to fight back against identity theft

Warning that the extended tax season only gives even greater opportunity for fraudsters, Donna Parent, chief marketing officer at Sontiq, the company behind the analysis, said “new victims right now may not find out until tax time next year”. 

To help counter the threat posed by identity theft and tax scams, people are being encouraged to take appropriate measures to help limit the risk of falling prey to scammers. Here’s the steps you should take to try and protect yourself, your family, your assets, and your credit from tax identity theft:

$200 billion was the cost of identity theft last year, so how can you guard against tax fraud

(Image credit: pixabay)

1. File taxes early

Most people are unaware that they or even their children have fallen foul of tax identity theft until they’ve loaded up their tax software and had their tax returns denied on the basis of submitting duplicate or previously filed information. Scammers tend to get to work quickly once the tax season opens, meaning it can go unnoticed for months until the IRS rejects your return. Identity thieves also use this method to steal children’s identities to claim additional tax credits. 

2. Request an IP PIN from the IRS

If your tax return is turned away as a duplicate, you’ll need to file an IRS Form 14039, Identity Theft Affidavit. That way, going forward, you may be eligible for an IRS Identity Protection PIN, which should prevent scammers from being able to file under your name. 

3. Don’t share personal information via email or text

While taxpayers are being urged to file online this year to avoid delays in getting refunds, take note that the IRS will never contact taxpayers by email or even by phone. If you receive an email or call purporting to be from the IRS, it’s almost certain to be a scammer trying to garner the type of personal information that will allow them to file under your name. 

$200 billion was the cost of identity theft last year, so how can you guard against tax fraud

(Image credit: Getty)

4. Take care using public Wi-Fi 

If you use public Wi-Fi, it’s always best not to visit sites that require a username and password, or ones that hold your personal information, such as health insurance data, banking and credit card numbers, or credit report results. If you must connect, ensuring you have mobile security features in place is essential, including VPN services, on your mobile device for added protection. 

5. Protect your personal identity

Investing in the best identity theft protection services is almost always a wise decision to safeguard your household against fraud. Such services can also help you to put the damage right if the fraudsters still manage to somehow get through.  

Tim Leonard

With over 20 years’ experience in the financial services industry, Tim has spent most of his career working for a financial data firm, where he was Online Editor of the consumer-facing Moneyfacts site, and regularly penned articles for the financial advice publication Investment Life and Pensions Moneyfacts. As a result, he has an excellent knowledge of almost areas of personal finance and, in particular, the retirement, investment, protection, mortgage and savings sectors.