Tuesday, January 28, 2014

Avoid Tax Fraud and Identity Theft: Tips from a Professional

ID theft, identity theft, tax fraud, information securityOnce again, it’s about time to talk about tax fraud. Yes, I know. Every year around this time, just about every information security blog brings it up—you know, how it’s really fraud, how identity theft really happens, and how it could happen to you.

Well…it is, it does, and it could.

But I’ll eschew the scary tax fraud stories this time and just give everyone some practical tips they can use. Last year, a local tax accountant provided us with some really good, basic advice to provide to readers and clients on the subject. It was well received, so I’m going to post it again.

From David Dvorak
Tampa accountant
Owner, Dvorak CPA (www.sunshinestatecpa.com

Want to Avoid Tax Fraud? 

A few small steps and a little extra care can make all the difference in a safe tax season.

1) Keep Valuable Personal Information Safe.

Fraudsters need three pieces of information to file a fraudulent tax return for you: name, SSN, and. These are the holy grails of tax fraud information. Avoid giving out these three pieces of information unless you trust the recipient.

The truth is, most organizations don’t need your personal information, so don’t give it out regularly. If an organization does ask for your social security number, birthday, or both, ask why they need it, and decline to provide the information if anything feels fishy. 

Also, never carry your social security card in your wallet. Since your driver’s license usually has your birthday, anyone who finds your wallet with a driver’s license and social security card has everything needed to commit identity theft and tax fraud.

2) Be Diligent and File Early to Avoid Fraud.

File your tax return as early as possible. By filing your return before an identity thief, the IRS will accept your legitimate return and reject the thief’s. If you file your return after the IRS has accepted the fraudulent return, then you will have to deal with the hassle of proving your return is the legitimate one.

3) Do Your Research.

Use an IRS-registered tax preparer. Beginning a few years ago, the IRS began requiring all professional tax preparers to register for a PTIN number. Ask any preparer you’re interviewing for their PTIN. If they give you a strange look of non-recognition, don’t use them.

And, in case it’s too late, here’s a little helpful information if someone has already filed a fraudulent return in your name.

You’ll need to complete Form 14039—Identity Theft Affidavit and include it, along with a form of identification, with your paper return. Of course, your return’s processing will be delayed, but at least the IRS will finally have the correct return.

Thanks, David. And if you’re looking for a little more information about tax fraud prevention, visit the IRS website for the 2014 tip sheet.