Protecting Yourself from Tax Identity Theft This Tax Season
Tax season is a prime time for identity thieves to steal sensitive financial information and commit fraud. In 2023 alone, the IRS flagged over 1 million tax returns for potential identity theft, with more than $6 billion in refunds requiring additional review. At Waterworth Wealth Advisors, we believe that understanding the most common scams and taking proactive steps to safeguard your personal information can help protect you from falling victim.
Common Tax Identity Theft Scams
- Phishing Emails and Phone Scams
Scammers impersonate the IRS via email, phone calls, or text messages, attempting to obtain sensitive information. The IRS never initiates contact through these channels. - Fraudulent Tax Returns
Identity thieves file fake tax returns using stolen Social Security numbers to claim refunds before the legitimate taxpayer files their return. In 2023, tax-related identity theft resulted in $5.5 billion in financial losses. - Fake Tax Preparers
Some fraudulent tax preparers collect personal information under the guise of assisting with tax filing, only to use it for identity theft. - W-2 Scams
Cybercriminals trick employers or HR departments into disclosing W-2 forms, which contain employees’ Social Security numbers and income details.
Who Is Most at Risk?
While anyone can fall victim to tax identity theft, certain groups are more vulnerable, including:
- Seniors – Often targeted due to their stable income sources and potential unfamiliarity with digital security.
- High-Income Earners – Individuals with significant financial assets are prime targets for scammers.
- Business Owners and Executives – Their tax documents contain valuable information that can be exploited for large-scale fraud.
- Previous Victims of Identity Theft – If your information has been exposed in past data breaches, scammers may try to use it again.
How to Protect Yourself from Tax Identity Theft
1. File Your Taxes Early
The sooner you file, the less time criminals have to submit a fraudulent return in your name.
2. Use a Secure Tax Preparer
Work with a trusted, credentialed tax professional. Verify their legitimacy through the IRS Directory of Federal Tax Return Preparers. As financial planners and wealth advisors in Grapevine, TX, we work closely with several local CPAs and we can introduce you to one of our trusted and vetted CPAs if you need a recommendation.
3. Guard Your Social Security Number (SSN)
Avoid carrying your Social Security card and only share your SSN when absolutely necessary.
4. Be Cautious with Emails and Calls
The IRS will never call, email, or text demanding immediate payment or sensitive information. If you receive suspicious contact, report it to the IRS.
5. Use Identity Protection PIN (IP PIN)
The IRS offers an IP PIN to prevent unauthorized individuals from filing tax returns in your name. You can apply for an IP PIN through the IRS website.
6. Shred Sensitive Documents
Properly dispose of tax documents containing personal information to prevent dumpster-diving thieves from accessing your data. If you need a secure way to dispose of sensitive paperwork, you can drop off documents at our office in Grapevine, TX, and place them in our shredder box for safe destruction.
7. Be Cautious When Sending Sensitive Information via Email
Avoid sending sensitive, non-public information through email, as cybercriminals can intercept it. Instead, use secure document vaults like your eMoney vault to safely store and share financial documents.
- Let Us Help You Securely Share Your Tax Documents
If you need assistance scanning and securely sharing your tax documents with your CPA, Waterworth Wealth Advisors can do it for you. Bring your documents to our office, and we will scan and upload them to your eMoney vault for safe and convenient access for you and your CPA. - Use the IRS Website for Tax Payments
Instead of mailing paper checks, which can be lost or stolen, use the IRS website to schedule and pay your quarterly estimated tax payments securely. - Monitor Your Financial Accounts
Regularly check your bank accounts, credit reports, and IRS account to detect any unauthorized activity. - Use Strong Passwords and Two-Factor Authentication
Ensure your online tax accounts and financial services use strong passwords and enable two-factor authentication for added security.
What to Do If You Suspect Tax Identity Theft
- Report it to the IRS by filing Form 14039 (Identity Theft Affidavit). The IRS Identity Theft Victim Assistance program handled 294,138 individual cases in fiscal 2023, a significant rise from 92,631 in 2019.
- Check Your IRS Account to see if a return has already been filed in your name.
- Notify the Credit Bureaus and place a fraud alert on your credit report.
- Contact the Federal Trade Commission (FTC) to report identity theft. The FTC received 2.8 million fraud and identity theft reports in 2021, a 22% increase from the previous year.
- Visit the IRS Identity Theft Guide for Individuals for further steps: IRS Identity Theft Guide
By staying informed and proactive, you can significantly reduce your risk of falling victim to tax identity theft this tax season. If you have concerns about protecting your financial identity, consult your trusted financial advisor or tax professional.
