Home > Identity Theft > The Real Reason to Start Your Taxes Now

Comments 0 Comments

How would you cope if the tax refund you were counting on, and were counting the days until you received, just never showed up? How freaked out would you be if you found that it was sent to another address instead? How angry would you be if you received a notice a couple weeks after filing from the IRS, that not only didn’t include your refund but also demanded that you fork over additional taxes for supposedly failing to properly document income attributed to your Social Security number but from some employer you had never even heard of?

That is what people every day have to deal with when they are caught up in the nightmare of tax-related identity theft — a crime that is rapidly reaching epidemic proportions. It jeopardizes the financial future of millions of Americans, robs the Treasury of billions of dollars and can be just the first indication to victims that their lives are about to be turned upside down by thieves (and inside out by the government and newly-discovered creditors).

There were more instances of tax ID theft uncovered in the first six months of 2013 (1.6 million) than in all of 2012 (1.2 million), and IRS criminal investigations are up 66% since then. In that period of time, the IRS stopped 14.6 million suspicious returns from being processed and refused to distribute $50 billion in fraudulent refunds – and that’s just a drop in the bucket of what’s American taxpayers are really facing.

The Treasury Inspector General for Tax Administration found another 1.1 million suspected fraudulent returns that the IRS missed in 2011 alone – which resulted in $3.6 billion in apparent fraudulently-issued refunds. They also identified 174,000 Social Security numbers that were used on multiple tax returns in 2011, resulting in $183 million being paid out to identity thieves who filed fake returns before legitimate taxpayers got around to it. The most targeted Americans don’t even seem to know it – people whose income doesn’t appear to necessitate filing returns are most at risk, followed by students ages 16-22.

The Federal Trade Commission says that tax and wage-related fraud was the most common kind of identity theft about which consumers complained in 2012 – a full 43.4% of the identity theft complaints that the agency fielded. In short, tax identity theft is not an uncommon crime and, by all measures, it’s a growing criminal enterprise.

Ask any expert what the easiest way to avoid being a victim of this crime is, and you’ll get the same answer: File as early as possible. Once you file your return, it doesn’t matter what information an identity thief has on you – he or she can’t file in your name and collect your return.

But while there are already a few early birds out there looking for that sweet IRS refund worm the moment their W-2s arrive, many Americans wait until April to file their returns. However, this rising tide of tax identity theft is a good reason to reconsider – even in January – the wisdom of waiting until the last possible minute to file.

For those folks who don’t have the cash in hand for the tax man, filing early isn’t always an option. But that doesn’t mean you should cross your fingers, wait until April and hope for the best. If you can’t file fast, here are five things you should do to lower your risk of tax identity theft.

1. Mind Your Mail

Waiting on a W-2 from your employer, a 1099 from your savings account interest or a 1098-E to document your student loan interest? An identity thief might be, too – and that “Tax Documents Enclosed” notation on the envelope makes it easy for them to know which documents to pilfer. If your mailbox doesn’t lock, look into buying one that does, having your mail held at the post office until you receive your documents or, for next year, getting a P.O. box and changing your address with your employer.

2. Check on the Availability of Online Tax Documents

Many banks and even payroll processors offer electronic documents (though, obviously, you need to use good Internet security protocols, like strong passwords and secured WiFi, to make this method safe). If it’s available and you use strong security protocols, the documents you need might never make it into an obvious envelope at all.

3. E-File (and Free-File)

Bypass the hassle of figuring out what to staple where, and get a fast, free notification that your return was accepted (or early notice that there’s a problem). The feds will even let you e-file for free if your return lists an adjusted gross income (AGI) of $57,000 or less, and many states do the same.

4. Verify Your Tax Preparer

Even many in the government know that tax forms are complicated, the directions aren’t intuitive and folks get frustrated trying to figure it all out. That complexity and frustration fills tax preparers’ offices and coffers during tax season – but not all preparers are created equal. Before patronizing the local pop-up tax preparer or online outlet, use the IRS’s tips for checking out tax preparers and make sure the person you’re working with has a Preparer Tax Identification Number issued by the IRS.

5. Be Proactive

If you’ve already experienced some form of identity theft, even if it’s not tax ID theft, take some time to report it to the IRS via its Identity Theft Affadavit (Form 14039). The form will alert the IRS to be more careful when processing returns from your account and may prompt follow-up actions, including the issuance of an Identity Protection PIN to use when filing your taxes.

Taking these steps can make filing your taxes slightly more arduous – at least this year – but nothing is more time-consuming and painful than undergoing an IRS audit to prove that you’re you and the person who filed your tax return wasn’t.

More on Identity Theft:

Image: cabania

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team