Detering Tax Fraud During Tax Season

Tax fraud is  widespread risk, especially  during tax season. Here, the accountants at Fitzpatrick, Leary, & Szarko outline ways to defend yourself from tax fraud.

The most common form of tax fraud is when a perpetrator files a tax return using personal information stolen from someone else. The IRS takes tax fraud very seriously, and dedicates substantial resources to combatting it. In support of these efforts, the Federal and Maryland government use sophisticated analytical technology to detect suspicious patterns and possible fraud in online tax filings. In 2017, Maryland announced that it will not process state tax returns until an individual’s W-2 is on file, as another measure in combatting the problem. The state has also taken the initiative to begin creating legislation that would help the comptroller’s office prosecute tax fraud more strictly and efficiently.

Despite the measures the government and tax authorities are taking to detect  the occurrence of tax fraud, there are several steps that individuals can take to help avoid becoming a victim. It is important to undertake extra precaution to avoid tax or identity fraud, especially during tax season, as this could prevent you from receiving your tax refund in a timely manner and affect filing in years to come.

Ways to Prevent Identity Theft

  • Do not carry on your person your Social Security card, or any documents that display your SSN or Individual Taxpayer Identification Number (ITIN) on them Keep these documents at home in a safe place.
  • Only give a business your SSN or ITIN when required.
  • Secure personal information in your home. Dispose of documents with personal information on it in such a way that no one could obtain the information from it, such as with a paper shredder.
  • Do not give out personal information over the phone unless you are certain of with whom you are speaking. Be especially cautious if you did not place the call, but received the call.
  • The IRS will never make initial contact with you by telephone or email. While the caller or email may sound very official or be very threatening, do not be coerced into giving out information.  Hang up on the caller.  Do not respond to any email or open any attachments.
  • Check your credit report at least every 12 months. This will help you catch any suspicious activity.
  • Protect personal computers. Use a variety of difficult-to-crack passwords, download security/anti-spam and virus software, and implement firewalls and security patches. Discard of old computers in a safe manner such as destroying the hard drive.  Do not just dump them in the trash.

If you may be at risk of tax fraud, due to a stolen purse, wallet, or credit card information, you can contact the IRS Identity Protection Specialized Unit at 800-908-4490.  You should also contact one of the 3 major credit reporting bureaus so they can flag your credit report as high risk for fraud.

If you have Become a Victim of Identity Theft

You may be the victim of identity theft, and tax fraud, if the IRS or your tax professional inform you that:

  • Multiple tax returns have been filed under your name and SSN.
  • IRS records indicate that you received more wages than you actually earned.
  • You have a balance due, or collection actions taken against you for a year you purportedly did not owe any income taxes.
  • Your state or federal benefits were reduced or cancelled due to income changes.

If you believe you have been a victim of identity theft and tax fraud, there will be a phone number you can call on any notices received from the IRS. Filling out an IRS Identity Theft Affidavit will also help the situation to be rectified.

Additionally, the IRS recommends reporting incidents of identity theft to the Federal Trade Commission, to the local police and to the fraud department of the three major credit bureaus,. It is also important to freeze or close any accounts that have been tampered with or opened fraudulently.

A well-regarded certified public accountant can help you navigate through the sometimes-complicated process of filing your tax return, and help to ensure that you receive the refund to which you are entitled. For more information, contact Fitzpatrick, Leary, & Szarko, LLC.