One way to deter identity thieves in 2018 is to file your tax return as early as possible.
A common tactic of identity thieves is to file fraudulent tax returns that call for refunds using stolen Social Security numbers. The only way identity thieves can do this successfully is to file with your stolen personal information before you do. The IRS accepts only one tax return per Social Security number.
“Probably 25 percent of the clients I deal with at Filbrandt & Company have had their IRS accounts hacked, (with thieves) filing false claims or false tax returns,” said Jim Twesme, MBA, CFA©, a Filbrandt & Company financial adviser. “Clients who have had their IRS accounts hacked generally find out when they file their tax returns, and they are told someone else has filed or there already has been a tax return refund claim made.”
“Their IRS account is frozen, and going forward they have to file paper copies of their tax returns instead of doing it electronically,” Twesme said. “It’s a very disruptive thing to have to do.”
The 2017 Equifax credit reporting agency data breach exposed the confidential data of as many as 143 million Americans to identity thieves, and the IRS is uncertain what impact this new glut of confidential data in the hands of identity thieves will have for the 2018 tax season.
Having a credit freeze or credit monitoring in place doesn't prevent tax-related identity theft. The IRS estimates that during the first nine months of 2016, beefed up safeguards helped it stop 787,000 fraudulent returns totaling more than $4 billion in refunds — but it still paid out $239 million in "suspect" refunds.
Filing your tax return as early as possible in the January-through-April-15 tax filing cycle is recommended. Identity thieves will likely start as early in the cycle as they can, knowing that many people don’t receive their W-2 and other related income statements until mid to late January.
If you suspect you are a victim of identity theft, continue to pay your taxes and file your tax return, even if you must do so by paper, the IRS says.
Filing your return before an identity thief tries to file a false one using your information will block a theft attempt, at least for this tax season. However, all taxpayers should check with their tax specialist to ensure this strategy is best for them.
“I think you want to go on the assumption that your data is out there, and do everything you can to protect yourself,” said Travis Cliff, CFP©, a Filbrandt & Company financial adviser.