Tax identity theft ‘continues to be a huge problem,’ expert says. Here’s how to protect yourself

Personal finance

5M3photos | Moment | Getty Images

As the start of tax season approaches, experts are warning filers about tax-related identity theft, an issue that often halts returns and delays refunds.

Tax identity theft happens when criminals use your personal information to file a return in your name and claim your refund — and “it continues to be a huge problem,” said Eva Velasquez, president and CEO of the Identity Theft Resource Center.

The IRS’ Identity Theft Victim Assistance program had 294,138 individual case receipts during fiscal 2023, up from 92,631 in 2019, according to the National Taxpayer Advocate’s annual report to Congress released last week. 

More from Personal Finance:
Government shutdown could disrupt upcoming tax season, IRS commissioner says
‘Fraud is at a crisis level,’ says expert: 5 financial scams to watch out for
How to figure out your timeline to student loan forgiveness

Tax-related identity theft has diminished since the early days of electronic filing. But “the challenge is it takes so long to resolve,” Velasquez said.

Indeed, victims are waiting an average of almost 19 months for the IRS to process their returns and issue refunds, National Taxpayer Advocate Erin Collins wrote in the organization’s report to Congress. She called the lengthy waits “unconscionable.”

There are signs of tax identity theft listed on the IRS website, including a letter from the agency about a “suspicious tax return,” the inability to e-file, tax transcripts by mail you didn’t request and more.

There are also two key steps taxpayers can take to protect themselves.

File your tax return early

One of the best ways to avoid tax-related identity theft this season is by filing your return early, according to Mark Steber, chief tax information officer at Jackson Hewitt.

“There’s just too much downside risk in allowing the scammers and the stealers to come in and get in front of you by filing a faster return,” he said.

There’s just too much downside risk in allowing the scammers and the stealers to come in and get in front of you by filing a faster return.
Mark Steber
Chief tax information officer at Jackson Hewitt

Of course, it’s important to wait for the necessary tax forms to file a complete and accurate return. With missing information, the IRS may flag your filing, which could cause delays.

As a year-round precaution, the IRS recommends protecting your data with strong passwords, multi-factor authentication, encryption programs and software updates.

Get an identity protection pin for the future

If you’re looking for added protection, experts suggest getting an identity protection PIN, or IP PIN, from the IRS.

This six-digit number blocks others from using your Social Security number or individual taxpayer identification number to file a tax return. Once you enroll, the agency generates a new IP PIN for you each year.

Previously, IP PINs were only for identity theft victims. “Now, they’ve opened it to everyone,” Steber said. “I highly recommend it.”

However, he doesn’t recommend “last-minute adjustments” by trying to get an IP pin before filing your 2023 return. “If you file [your return] now, you do a lot more to protect your data and secure your personal information” than trying to get an IP pin in January, Steber added.

Articles You May Like

Education Department to forgive $1.2 billion in student debt for 35,000 borrowers
Traders see the odds of a Fed rate cut by September at 100%
San Francisco downtown is a ‘ghost town’ that needs revival, mayoral candidate says
With high prices and mortgage rates, aspiring and current homeowners feel ‘stuck’
GM’s 2025 EV production capacity target in doubt after Barra comments