Isn't That Rich Podcast

Tax fraud, particularly tax identity fraud, is a growing concern in our increasingly digital world. Mary K. Harris, an experienced tax professional and owner of an H&R Block franchise in Anna, Illinois, shares her invaluable insights on tax identity theft, how to recognize it, and what steps you can take to protect yourself.

What Is Tax Identity Fraud?

Tax identity fraud occurs when someone uses your personal information—such as your Social Security number (SSN)—to file a fraudulent tax return and claim a refund. While tax fraud is not new, the digital age has made it easier for scammers to exploit vulnerable individuals. According to Mary, tax identity fraud cases surged during the COVID-19 pandemic, fueled by fraudulent claims for stimulus payments and unemployment benefits.

Sobering Statistics:

• In 2019, the IRS reported 137,000 cases of tax identity theft.
• By 2021, that number jumped to 500,000 pending cases, highlighting the severity of the issue.

How to Spot Tax Identity Fraud

Several red flags may indicate you’re a victim of tax identity fraud:

1. Tax Return Rejection: If your e-filed tax return is rejected with a message stating a return has already been filed under your SSN, it’s a strong indicator of fraud.
2. IRS Letters: You may receive an IRS letter, such as a 5071C, asking you to verify your identity. This can occur if a fraudulent return has been filed using your SSN.
3. Unusual Activity on Your Credit Report: Unfamiliar accounts or activities on your credit report may also signal identity theft.

Steps to Protect Yourself

Fortunately, there are proactive measures you can take to safeguard your tax identity.

1. Set Up an IRS Online Account

Creating an account on IRS.gov is a powerful first step. Through the secure ID.me system, you can verify your identity, access past tax documents, and monitor for any suspicious activity.

2. Request an IP PIN

The IRS offers an Identity Protection PIN (IP PIN) to help prevent fraud. This six-digit number is required to file your tax return and ensures that no one can use your SSN without your PIN. You can request one via your IRS account.

3. Consult a Tax Professional

Even if your taxes seem straightforward, working with a professional can provide an extra layer of protection. Tax professionals are trained to spot fraudulent activity and can help guide you if you encounter issues.

4. Monitor Your Credit Regularly

Regularly checking your credit report can help you catch any unauthorized activity early. Many tax identity theft cases start with scammers gaining access to personal information used for fraudulent financial activities.

5. Be Cautious with Communications

The IRS will never email, text, or call you without prior notification via mail. If you receive such communications, assume they are fraudulent and report them.

Evolving Threats: Tax Fraud in the Age of AI

As technology advances, so do the methods scammers use. For example:

• AI-Generated Voice Scams: Fraudsters may use AI to mimic the voice of a loved one, asking for personal or financial information.
• Fake 1099 Forms: Scammers may create fake 1099 forms to file false returns.
• Phishing Emails and Texts: Be wary of messages claiming issues with package deliveries or accounts that require clicking suspicious links.

Mary also cautions against scanning QR codes from unknown sources, as these can redirect you to malicious sites.

What to Do If You’re a Victim

If you suspect tax identity theft:

1. File a Form 14039 Identity Theft Affidavit with the IRS.
2. Work with your tax professional to file your return manually.
3. Respond promptly to any IRS letters to resolve the issue.
4. Request an IP PIN to prevent future incidents.

Keep in mind that while the process of correcting tax identity theft can be lengthy, the IRS does ensure victims eventually receive the refunds they’re entitled to.

Final Advice for the Upcoming Tax Season

As tax season approaches, take these steps now to protect yourself:

• Set up your IRS account and ID.me verification.
• Request an IP PIN for an added layer of security.
• Work with a trusted tax professional who stays up to date on changing tax laws and can help you navigate any issues.

Connect with Mary K. Harris

If you’re looking for expert help this tax season, you can find Mary at her H&R Block office in Anna, Illinois. For more information, call 618-833-2222 or visit her office’s website here.

Protecting yourself from tax identity fraud starts with being informed and proactive. Stay vigilant, and don’t hesitate to seek professional advice.