How can I avoid tax-refund identity theft?

Identity theft has been a longstanding problem. By appropriating a victim’s Social Security Number and other personal information such as name, address and age, identity thieves are able to open credit accounts, make purchases, conduct financial transactions and commit other thefts and frauds.

More recently, identity thieves have been using victims’ personal information to commit tax-refund fraud. A data breach earlier this year involving fraudulent returns filed via the digital tax preparation service TurboTax brought this threat to light. Since then, there have been numerous reports of fraudulent tax return incidents across the nation.

Tax-refund fraud is expected to soar this tax season and total $21 billion by 2016, from just $6.5 billion two years ago, according to the Internal Revenue Service. One reason: It takes just a victim’s name, birth date and Social Security Number to file a tax return.

According to the Identity Theft Council, a non-profit advocacy group, there are steps that individuals can take to lessen the risk of tax identity theft or deal with its consequences after it occurs.

DON’T GIVE OUT INFORMATION

Be wary of email links and attachments that seek your data. Realistic-looking emails can harbor malware that could steal your personal information—a practice known as phishing. The IRS reminds taxpayers that it never initiates contact by email, text messages or social media.

Another pre-emptive action to take is to sign up at irs.gov and create an online account in your name so that tax fraudsters cannot do the same. This could help prevent identity thieves from creating an account and obtaining a copy of your past returns – and all of your pertinent information -- by filing IRS Form 4506.

BE PROACTIVE

Unfortunately, there is no way to find out if someone has already filed a tax return using your Social Security Number until you send in your own return and receive notification that one already has been submitted in your name. Filing early can beat thieves to the punch.

Meanwhile, be careful. Experts say to use strong passwords and change them frequently. Update computer applications, especially antivirus software, and make sure that wi-fi access is password-protected.

If you prepare your own taxes using a commercial product, make sure your personal information is accurate. What about filing a paper tax return? That may not help either. If thieves can get your Social Security Number and other information via another source, they can still file a false return.

IF YOU ARE A VICTIM, ACT QUICKLY

• File a report with law enforcement.
• File a complaint with the Federal Trade Commission at www.identitytheft.gov or the FTC Identity Theft Hotline at 1-877-438-4338.
• Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records: Equifax, www.Equifax.com, 1-800-525-6285; Experian, www.Experian.com, 1-888-397-3742; TransUnion, www.TransUnion.com, 1-800-680-7289
• Contact your financial institutions and close any accounts opened without your permission or tampered with.
• Check your Social Security Administration earnings statement annually. You can create an account online at www.ssa.gov.

MORE INFORMATION FROM THE IRS

For additional information about tax-related identity theft, visit the IRS identity-protection page at www.irs.gov/Individuals/Identity-Protection. Or call the IRS’s identity theft hotline 800-908-4490.