Filing Your Taxes Early Can Help You Avoid Tax Fraud
We get it. Taxes are due on May 17, so why take the time to get them done in March? Or February? Unsurprisingly, many people wait until the last week to file their taxes.
However, according to a 2020 Lending Tree survey, 40% of taxpayers rely on their tax refund. Many (65%) use it to pay down credit card debt. But there is another important reason to get your taxes done earlier: tax fraud. In 2019, the IRS identified 442,991 identity-theft related tax returns worth $3.63 billion. Just imagine all the tax ID fraud they didn’t catch.
How Does Tax Fraud Work?
Identity thieves can take a taxpayer’s Social Security number through data breaches, sifting through their trash, calling and impersonating the IRS, or using any number of other approaches. The thieves can then sell that taxpayer’s identity to the highest bidder on the dark web. Some of those buyers might fill out and submit a tax return BEFORE you do. The IRS then sends the refund check to the fraudster instead of to the taxpayer. When the taxpayer finally does file, they may learn their refund has already been disbursed.
Oftentimes fraudsters attempt to swipe your Social Security number by posing as the IRS. These bad actors might call and tell you that you have unpaid taxes and must remit payment immediately. They might even have some of your personal information already. If this happens, visit the IRS newsroom to get the latest information on the kinds of requests that might legitimately be sent to you. If you think you might be a victim of tax fraud, you should report it to the IRS.
Are There Other Reasons to File Early?
If you plan to use the refund to pay down your credit cards, you’ll wind up paying less in interest if you make those payments a few months early. If you wind up owing the government money, you’ll still have time to come up with the funds, which will not be due until the actual filing deadline of May 17.
How Can You Protect Your Social Security Number?
While filing early can help you avoid tax fraud, it’s a good idea to protect your Social Security number. One of the best ways to help protect it, as well as other sensitive personal data, is to buy identity protection coverage like Complete ID. Complete ID will send you alerts for any name or address associated with your Social Security number. If a name or address is being used fraudulently, specialists can help you contact the Social Security office, review your credit report, and place a fraud alert or security freeze with the three major credit bureaus.
To learn more about how you can protect yourself every tax season and beyond, check out Complete ID, a comprehensive identity protection service at a low, Costco member-only price.
When people hear the words “tax fraud,” they often think about efforts to cheat on taxes. Tax ID fraud sounds similar but occurs when someone uses your stolen personal information (or “ID”),
The FTC has seen over 17,000 complaints related to COVID-19 related fraud.1 We teamed up with Brian Stack, Experian’s Vice President of Dark Web Intelligence and Engineering to put together a short webinar designed to help people reduce their COVID-19 related fraud risk.