With tax season starting, it’s a good idea to take extra precaution to understand how to prevent tax identity fraud.

Tax identity fraud takes place when a criminal files a false tax return using a stolen Social Security number in order to fraudulently claim a refund. Identity thieves generally file false claims early in the year and victims are unaware until they file a return and learn one has already been filed in their name.

Additionally, cybercriminals have been known to impersonate Internal Revenue Service (IRS) agents and often alter caller ID numbers and emails to make it look like the treasury department, the IRS or another official agency is contacting a taxpayer. Scammers may use employee titles, a person’s name, address and other personal information to sound official.

These individuals will often request personal information to verify the details they have to process a tax refund. Out of concern, taxpayers share personal information and even send money.

Just a few pieces of your personal information can be used to steal your identity and open new lines of credit, which may damage your credit history if not caught and dealt with. If you receive any unusual phone calls, check and monitor your credit score regularly for any irregularities. The best way to combat a tax fraud scam is to educate yourself and to know what to look for.

Prevent tax ID fraud

To help prevent tax ID fraud, here are a few tips and reminders that will help ensure you are safe this tax season.

  • File early. File your tax return as soon as you have all of your documentation.
  • File on a protected Wi-Fi network. Be sure you’re connected to a password-protected personal network.
  • File your taxes online and set up direct deposit. Combining direct deposit with electronic filing is the fastest way to receive your refund, and there is no chance of it going uncashed, getting lost, stolen or destroyed.
  • Use a secure mailbox. Mail your tax return at the post office or an official postal box instead of your mailbox at home.
  • Find a tax preparer you trust. Get recommendations and research a tax preparer thoroughly before handing over all of your financial information.
  • Shred paperwork. Prevent tax ID fraud by shredding paperwork you don’t need and securely file the paperwork you do.
  • Beware of phishing scams by email, text or phone. Scammers may try to solicit sensitive information by impersonating the IRS. Know that the IRS will not contact you by email, text or social media. If the IRS needs information, they will contact you by mail first.
  • Keep an eye out for missing mail. Fraudsters look for W-2s, tax refunds or other mail containing your financial information.

Red flags to watch out for

Remember, the IRS will never:

  • Initiate a phone call or email to ask for personal information.
  • Call or email to demand immediate payment using a specific payment method, such as a prepaid debit card, gift card or wire transfer. Generally, the treasury department will first send a bill through the U.S. mail to any taxpayer who owes taxes.
  • Threaten to immediately bring in local police or other law-enforcement groups to have the taxpayer arrested for not paying.
  • Demand that taxes be paid without giving the taxpayer the opportunity to question or appeal the amount owed.
  • Ask for credit or debit card numbers over the phone.

Unfortunately, scammers may try to further intimidate you if you refuse to pay them. In some instances, a criminal may even have another member of their fraud team pose as a police officer to make the threats seem more authentic. Do not waver. Hang up the phone and report the scamming incident to the Treasury Inspector General for Tax Administration‡ as soon as possible.

By reporting the incident, you can help protect other individuals because the IRS will use information you provide to update taxpayers with new tactics and methods these criminals are implementing.

Protect your finances from those closest to you

Practicing smart and safe financial boundaries shouldn’t be limited to tax season, so it’s important to set financial boundaries year-round to ensure your personal information stays safe. The following tips can help keep you from falling victim to fraud inflicted by loved ones and friends.

  • Keep your financial information secure. The first step to protecting yourself from fraud is to keep your bank information and checkbooks in a safe, secure place. If you believe any family member or friend has access to your financial information who shouldn’t, including bank statements, accounts, debit cards, checks or credit cards, contact your bank immediately about getting new cards and putting alerts on your accounts to notify you of irregular spending or activity.
  • Monitor your accounts. In addition, it’s important to check your balances frequently to monitor activity and keep an eye on your accounts. How quickly you report fraud to your bank could affect whether you are responsible for all or a portion of the fraudulent checks or charges. It’s also important to open and review statements immediately, whether you’re receiving them digitally or via hard copy. You should not share your PIN, online banking login or password with anyone. If you do, and they commit financial fraud, you may ultimately be responsible for any fraudulent charges or withdrawals because you provided them access to your accounts.
  • Have open communication with loved ones. Money issues come up in every relationship but being secretive about using a relative or spouse’s money is especially hurtful and destructive. This form of fraud can include anything from spouses securing lines of credit using their partner’s social security numbers without them knowing to relatives who are supposed to get groceries or prescriptions and instead use the payment information to clean out a checking account.
  • Set alerts. Another way to protect your finances is to set alerts through your online banking tools and apps to help monitor your account activity. You can set alerts that notify you every time a transaction is made or when money is withdrawn. You can also customize the alerts to only notify you when a purchase over a specified dollar amount is made. The harder you make it for people to get access to your finances, the harder it will be to fall victim to financial fraud.

Tax season can be a stressful time of year and the possibility of fraudulent activity can add to the seasonal worries. Informing yourself of the types of tax fraud scams and knowing the steps to take if you receive a suspicious phone call or email, can help bring more peace of mind.

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