Tax season is the one time of year that a lot of sensitive personal data is on the move. Employers and financial institutions are sending you tax documents, you are then transmitting them to your accountant or using tax filing software. Take care to safeguard that data every step of the way. Tax season is already stressful enough, individuals increasingly have to contend with the possibility of fraud or identity theft involving their tax return. Tax return fraud is a huge problem for U.S. citizens.
“Tax-return fraud is a mounting problem. In 2013, according to a Government Accountability Office report released last year, the Internal Revenue Service thwarted $24.2 billion in fraudulent refunds requested — but paid out $5.8 billion.”
Scammers can easily whip individuals into a panic, aggressive efforts to steal data and cash by masquerading as IRS officials. Some scam artists try to convince you that you are a victim of a fraudulent return and need to verity your personal information. Others threaten audits, fines, arrests and all manner of other dire consequences to victims who don’t wire cash immediately or click-through a link to confirm their personal information.
Here’s a conspicuous flaw in the system as currently set up: To file a tax return electronically, all someone needs is a name, date of birth and an SSN. The IRS accepts tax filings as soon as Jan. 1, but employers aren’t required to submit correct employment information to the agency until March, by which time roughly half of all refunds have been paid out. (For that matter, the IRS doesn’t begin matching employer-submitted data to tax returns until the summer.)
You might see official-looking seals and language in an email that have been pulled from legit IRS communiques, or hear background noise in a voice mail meant to resemble a call center. Don’t click on any links in emails or call back any numbers left for you in a voice mail. Pushing calls and emails are the easiest tax fraud to avoid. Your best defense, keep calm and think it through.
“The IRS and the CRA have said repeatedly that its first point of contact with you is going to be by mail. Not an email and not a phone call.”
The agency has suspended processing of 4.8 million suspicious returns so far this year, worth $11.8 billion, the IRS said in an email to CNBC. Among that number are 1.4 million returns with confirmed identity theft, totally $8.7 billion.
Additional pre-cautions:
- Not receiving an expected form could be a red flag of old-fashioned mail theft.
- Make a check list of documents or forms with the approximate date that they should have arrived.
- Use a secure file service to transmit documents electronically to your tax preparer
- Avoid sending tax information by email
- Personally drop off documents to your tax preparer.
- Delays in receiving last year tax refund could signal that you could have been targeted by scam artists.
When in doubt, your best bet is to hang up. Contact the entity directly through a phone number that you know is legitimate or by email. Even if you’re not a victim, be aware that government authorities have put in place safeguards to thwart tax fraud which could delay your refund or snarl your return.
This post was inspired by my daughter who reminded me that sending tax information via email isn’t very safe.
Smart Money 
Another timely and informative article. Do have two questions and am wondering if you can help.
1. I already submitted my taxes and received my return. However, I just received a 1095-C from my former employer showing “Employer-Provided Health Insurance Offer and Coverage.” There are no dollar amounts on the paper and I already noted when filing my tax return that I did have insurance through my employer. Do I need to resubmit my taxes with any information from this form I received from my former employer?
2. My wife used to get upwards of $3-7k for her tax return. However, since we’re now married and filed separately, she’s now only getting $300 back. Nothing else changed in terms of her finances. So, I’m wondering, should I refile with her jointly or is this drastic decrease in tax return something we should expect from now on?
Thanks
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I am not a U.S. tax expert but this is what I know.
Answer to question #1:
Amended returns aren’t mandatory. You are not obligated to file an amended return, even though tax advisers may tell you it’s a good idea—that’s because the IRS will probably send you a bill based on the revised Form 1099 or K-1 once IRS computers match that form against your form 1040.
On question # 2:
Couples who file separately receive few tax considerations. Separate tax returns may give you a higher tax with a higher tax rate. The standard deduction for separate filers is far lower than that offered to joint filers.
1. In 2015, married filing separately taxpayers only receive a standard deduction of $6,300 compared to the $12,600 offered to those who filed jointly.
2.If you file a separate return from your spouse, you are automatically disqualified from several of the tax deductions and credits. For example; Earned income tax credit, child & dependent care tax credit
3. In addition, separate filers are limited to a smaller IRA contribution deduction.
4.They also cannot take the deduction for student loan interest, or the tuition and fees deduction
5.The capital loss deduction limit is $1,500 when filing separately, instead of $3,000 on a joint return.
The best way to find out if you should file jointly or separately with your spouse is to prepare the tax return both ways. Double check your calculations and then look at the net refund or balance due from each method. If you use TurboTax to prepare your return, we’ll do the calculation for you, and recommend the filing status that gives you the biggest tax savings.
I hope that this information is helpful.
Rico
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As always, thanks for the information. We’re going to go through TurboTax and see if filing together helps us both. If so, I’ll just file again.
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Is it that easy to file a tax request? In Belgium, we either send in a paper file, duly signed. Or we submit an electronic file, protected with our electronic identity card (or an older system with pwd and secret codes provided by the government.)
Before any refund, there is an official paper mail with the outcome of the filing.
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Yes, it is very easy to file electronically in North America, you can receive a refund in eight days. Many people have mail delivered to an unlocked mail box. It is easy for crooks to have access to information that would allow them to file a tax return without you knowing about it.
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This is such an important article that I think everyone should read!
I had someone call my house and leave threatening messages claiming they were from the IRS and that I owed additional tax money. They said they would come out to my house in about an hour to collect the money or I would be arrested. I laughed at him and told him to come on over and that I would have the police waiting for him. Of course, I knew he was from another country and that the IRS doesn’t handle matters that way. Other IRS impersonators have received a phone number to call my “accountant” where I would hand out the phone number for the IRS Fraud Hotline.
All kidding aside, tax fraud and identity theft are no joke. Hopefully people will take these warnings seriously and do their best to protect themselves.
I’m a huge advocate of filing electronically and in many cases they will send over your refund in less than a week. I can’t say I get much of return myself where I play the “how not to give the IRS my money all year” game. This year worked out perfectly where I owed a whopping $3. I consider this to be an accomplishment because the money I earned remained in MY pocket instead of the governments! – Madison
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