Why Does the IRS Want You to Pay Taxes in Advance
When the tax season begins, the IRS usually calls for filing your tax return as soon as possible. The reason is not really designed to prevent the delay, which may contribute to the accumulation of unprocessed reports April 15 (although the pressure may help). It’s more to protect your identity and prevent tax refund fraud.
Tax refund scams happen when someone files your tax return before you and gets your refund. When you pay taxes, you find that your return has already been filed and your refund has been processed.
As if paying taxes wasn’t stressful enough. Now should you be worried that a scammer will get ahead of you?
How common is tax refund fraud?
It sounds unlikely, but it happens. In 2015 alone , the IRS rejected or suspended 4.8 million suspicious returns.
Just last month, a Florida woman was sentenced to more than three years in federal prison for filing forged tax returns. Between 2012 and 2014, she stole personal information to file over 100 fake tax returns, which allowed her to claim over $ 580,000 in refunds to other people (although she was actually only able to get $ 128,740 of that cash refund) …
The IRS, government tax authorities, and tax filing companies organized a Security Summit in 2015 to tackle fraudulent tax returns, and the number of sunk payments issued has dropped dramatically since then. But as Andy Phillips, director of the tax institute at H&R Block , told me, tackling tax refund fraud is still a big problem, thanks in part to a seemingly endless string of corporate data leaks that compromise personal and financial information.
How to keep your tax information safe
This applies the usual sound advice to keep your information safe, including regularly checking your credit report for unusual activity.
Even if you feel your data is secure, filing your tax return as early as possible reduces the risk of fraud. “Filing tax returns as early as possible is a way for taxpayers to ensure they stay ahead of fraudsters, even if their information was disclosed through data breaches or other means,” Phillips said.
For an extra layer of protection, he recommended getting an IRS IP PIN . This is a six-digit number assigned by the IRS to verify your identity when filing your tax return, rather than relying solely on your Social Security number as proof of your identity. Once you receive your PIN, you will use it every time you file your tax return through tax software or with a tax professional.
It is not yet available nationwide, but you can get it if you filed a federal return last year while being a resident of one of these states: Arizona, California, Colorado, Connecticut, Delaware, DC, Florida, Georgia, Illinois, Maryland, Michigan , Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas, or Washington.
What to do if someone steals your refund
The IRS cautions that any of the following could be an indication that your identity has been stolen and used to file a fraudulent refund.
- You will receive a letter from the IRS asking you about a suspicious tax return that you did not file.
- You cannot file your tax return electronically because of your duplicate Social Security number.
- You will receive by mail an extract from the tax office that you did not ask for.
- You will receive a notice from the IRS that an online account has been created in your name.
- You will receive an IRS notification that your existing online account has been accessed or disabled if you have not taken any action.
- You receive a notice from the IRS that you are in arrears for additional tax or refunds, or that you were enforced to recover taxes during the year you did not file your tax return.
- IRS records show that you received wages or other income from an employer you did not work for.
Phillips pointed to two more indicators. First, if you receive an email from an online tax preparation company about a new account that you have not opened, you should contact that company immediately. In addition, he recommends checking the Social Security Administration ‘s income statement at least once a year. “If there are earnings that don’t belong to you, that could be a sign that you are a victim,” he said.
“If you start receiving notifications from the IRS or your state, respond immediately to start looking into the issue,” Phillips said. If your return is denied because it has already been filed in your name, please fill out Form 14039, ” Identity Theft Affidavit”. This is a PDF file that you can fill out and print; then you must mail it to the IRS. You can also skip the affidavit if you wish and submit the form electronically during the next step: reporting identity theft to the FTC.
If you are the victim of identity theft that resulted in a fake tax return, you can request a copy of the transcript of a fake tax return filed in your name.
Phillips said you should also file a report with your local police station and then put a fraud alert on your credit card.