5 Ways to Avoid Falling Victim to Tax Fraud

In addition to the traditional ways of falling prey to theft, such as having your wallet stolen or credit card information exposed on the Internet, being a victim of tax fraud is yet another form of identity theft. Despite the Internal Revenue Service issuing numerous warnings in recent years, tax-related fraud continues to increase and it can turn into a real headache. There are heaps of malicious individuals and phony companies out there that send emails or make aggressive phone calls claiming to work for the IRS.

The Federal Trade Commission reportedly received nearly a quarter million complaints last year regarding tax-identity theft. 54,690 of those complaints were about individuals or companies posing as a representative of the IRS. This is a significant increase considering that only 2,545 of such scams were reported in 2013. Roughly the same amount or more is expected to be reported for 2015. Fortunately, The IRS is responsible for ensuring the security of citizens and the agency does a fairly decent job of preventing tax fraud and more has gone into that in recent years. While the  IRS has been successful to some extent, identity thieves are also doing their part in becoming more invasive and finding new ways to game the system. Below are 5 tips to avoid falling victim to tax fraud.

1. Protect your personal information to prevent tax fraud

The IRS has made great efforts to protect information provided by users. However, there is really only so much that the IRS can do. In the end, it is ultimately up to the individual  to be careful when sharing personal information on online. Remember to never complete or submit forms with your social security number, credit card digits or any personal information on a website that isn’t secure. If you are on a site that looks outdated, I would be hesitant about submitting a credit card or social security number. Make sure your browser settings are turned on to block untrusted websites. Never click on links or download attachments from unknown or suspicious emails. Always remember to log out of a secured server once you are finished. Finally, a little common sense and caution will go a long way in protecting your personal information.

2. Receive support from certified professionals to prevent tax fraud

There is a lot of CPAs who are always willing to provide advice in relation to tax issues. Certified accountants are required to renew their licenses annually in order to meet standards of professional ethics, knowledge and updating on tax matters. Make sure the tax preparer has the credentials and is  registered with the IRS. Before choosing a CPA to help you with your tax needs, first do your homework. Like many people today, you might be turned off by the large corporate accounting firms, such as H&R Block and Jackson Hewitt, and for good reason. On the other hand, doing it yourself just becomes too complicated when you have a business. Therefore, it is important to find tax professionals that are qualified, professional and will ensure that your personal information stays private. If you are in need of tax preparation, including specialized services, such as Quickbooks, estate planning and business formation, Katz CPA offers these and much more. Most importantly, Katz CPA is staffed by trained professional that add a personal touch.

3. Remember that the IRS will never call or email you

If you receive a threatening call or a email notice urging you to act within ’24’ hours from an individual or a company claiming to represent the IRS, you can be 100% sure that it is not the IRS. Remember that criminals are clever, manipulative individuals that are willing to do whatever it takes to get your information. No matter how convincing they may seem, always keep in mind that the IRS will not contact you by email or by phone. We may live in a digitally driven world, but the IRS will still only contact you through regular mail. This is regardless if you have an outstanding payment or not, so don’t be tricked by an intimidating voice on the other side of the line. The IRS never makes phone calls or sends emails to collect money or for any other administrative purposes. If you get an email from someone posing as the IRS, do not click on any of the links or attachments and forward it to phishing@irs.gov.

4. Filing your taxes early can help you avoid becoming a victim of tax fraud

Before the scammers can get to you, the best defense against tax fraud is simply to do your taxes early.  Fill out your forms as soon as possible before the tax season begins, which usually starts the second or third week of January. Regardless if the IRS owes you money or not, online thieves have all sorts of clever ways to make your life difficult. If you can act faster than the criminals and you legitimately file your return first, the IRS will automatically reject any subsequently filed returns in your name. The advantages of filing early are clear, so meet with your tax professional promptly. Remember that the IRS generally begins to accept filings in late January.

5. Change Your Passwords Often

Passwords are the key to keeping your personal information safe and preventing tax fraud. The best practice is to change the passwords that you use to log into financial institutions and even your email account on a regular basis. How often is a regular basis? I would recommend at least every 3 months an no more than 6 months. Even the largest companies are hacked from time to time, resulting in the leaking of millions of usernames and passwords into the vastness of cyberspace. Your passwords should be long, dynamic and include a mix of numbers, letters and symbols. Never include your date of birth, address or social security number in your password. For password recovery questions, it might even be better to lie, since it could be possible for hackers and programs to guess these things based on your background. While the sometimes overwhelming amount of usernames and passwords can often seem like too much in today’s complex world, these are also necessary measures to keep us safe from online criminals.

If you are contacted by suspicious companies posing as the IRS or have been a victim of the IRS, the best thing you can do is report it. Keep in mind that the IRS does have a reward system for individuals that successfully report tax fraud. If you want to keep your identity unknown, that is no problem as you may file a complaint anonymously. Hopefully, this article has provided some insight on how not to become a victim of tax fraud. If you are need of certified tax professional, do not hesitate to contact Katz CPA, your friendly CPA professionals in Bethesda, MD.

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