Why Taxpayers Should Worry About Identity Theft

Grabbing envelopes from mailbox

A month-long window of opportunity has opened up for scammers, and its timing is crucial for honest taxpayers. Here’s why:

Identity theft. Documents that you need in order to file your 2015 tax returns should start arriving soon in your mailbox. Employers are required to mail W-2 and 1099 forms by Jan. 31; banks and brokerage firms may have later deadlines.

With your Social Security number and other sensitive information, this paperwork provides identity thieves with enough details to open fraudulent accounts in your name. It’s especially easy pickings for crooks to simply follow postal carriers and steal these just-delivered tax documents from mailboxes.

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Having a locking mailbox or post office box, or being home to retrieve mail, provides some security. But if none of these options applies to you, consider asking a trusted at-home neighbor to promptly collect your mail, or have it held at the post office for personal pickup. Also, pay close attention to which expected tax documents have arrived and when; if you haven’t received them by mid-February, call the sender to ask why. If you learn that a document was sent to you, but you didn’t receive it, consider an immediate credit freeze.

Tax-refund fraud. By mid-February, your tax refund may have already been claimed by another type of ID thief — namely, one who e-files a fraudulent IRS return under your identity. This kind of swindler doesn’t need your tax documents, because to file returns electronically, all that’s needed (besides a computer) is a name, birth date and SSN — info that’s available elsewhere for as little as $25.

Why timing matters: The IRS began accepting individual electronic returns on Jan. 19, but employers don’t have to provide the agency with correct employment information until March. And though the agency may not match employer-provided data with consumers’ tax returns for months, it issues 90 percent of refunds within 21 days of receiving e-filed returns.

This allows well-timed scammers committing stolen identity refund fraud (SIRF), as it’s called, the chance to make up fake W-2s, 1099s and other information “so that the IRS receives the false SIRF return before legitimate taxpayers have time to file their returns,” the Justice Department explains. “The SIRF perpetrators arrange to have the refunds electronically transferred to debit cards or delivered to addresses where they can steal the refund out of the mail.”

Although the IRS says it stops most fraudulent claims, each year billions in refunds reach SIRF scammers, and refund-seeking bogus state tax returns are also filed. The good news: This year the agency has new initiatives and technology to combat tax-refund fraud. And victims of refund rip-offs eventually get their entitled money. But if possible, file your tax returns ASAP, to prevent possible headaches and future identity theft.

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For information about other scams, sign up for the Fraud Watch Network . You’ll receive free email alerts with tips and resources to help you spot and avoid identity theft and fraud, and gain access to a network of experts, law enforcement and people in your community who will keep you up to date on the latest scams in your area.

Photo: wholden/iStock

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