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After Anthem and Turbo Tax: Four Tips to Avoid Identity Theft During Tax Season

Published on Feb 13, 2015


How to avoid Phone Scams, Phishing Scams, Identity Theft, and Return Preparer Fraud associated with your tax return.
By Marcia Richards Suelzer, M.A., J.D. As the world grows evermore interconnected and dependent on technology, the risks of identity theft and diversion of personal (and company) assets increases as well. And, it seems that there is always an uptake in these nefarious activities around the holiday season and around tax time. That’s right: tax time. Tax-related identity theft is a huge problem. In fact, the IRS acknowledged that is paid that it paid roughly $5.2 billion in ID-theft-related refunds on 2013 returns, and it succeeding in detecting and thwarting an additional $24.2 billion of fraudulent claims, according to a report issued by the U.S. Government Accountability Office in August 2014. Bear in mind, this is only what the IRS estimated based on what it could detect—the actual risks are probably greater. Tax-related identity theft at the state level might get less national press coverage, but the problem is significant there as well. In fact, the recent hack records of Anthem, Inc., one of the country’s largest health care networks, compromised the security of more than 80 million individual records. Anthem reports that the stolen information included names, dates of birth, member ID/ social security numbers, addresses, phone numbers, email addresses and employment information. It is easy to see how individuals possessing this stolen information can assume the rightful owner’s identity for many purposes—including filing tax returns and claiming erroneous refunds. The danger is significant enough that the state of Connecticut went on record urging its citizens who may have been affected by the Anthem data breach to file their tax returns as soon as possible. If a criminal obtains your refund, “it can take years to resolve the problem,” according to Department of Revenue Services Commissioner Kevin Sullivan Commissioner. While early filing is may be more of a priority for some individuals, it makes sense to file as early as you can In the same week, tax preparation software giant Turbo Tax temporarily suspended the filing of state tax returns due to a sharp increase in returns that carried hallmarks of identity theft. (The issue appears to have affected only returns prepared with the Turbo Tax program, not  other Intuit products used by tax professionals.) Although the shutdown was very brief, the spike in illegal activity was significant. In the press release it issued warning its residents of the threat, the State of Utah indicated that it had flagged 8,000 returns as potentially fraudulent and reported that similar problems had been experienced in 18 other states. Although no confirmed link exists between the Anthem data breach and the uptick in fraudulent returns, the coincidence in timing is concerning as is the fact that the states involved and Intuit have indicated that their own systems were not breached.  Again, taxpayers need to be both vigilant and aggressive in monitoring their tax returns and personal information. What’s a taxpayer to do? Here are four tips to protect your tax information, as supplied by the IRS in this year’s “Dirty Dozen,” an annual compilation of actions that that the IRS considers the most outrageous and egregious tax-related behavior. As tax season gets underway, watch out for these dirty tricks that can put your refund—and other assets—at risk.
  • Phone Scams. The IRS will never call you out of the blue, threatening you and demanding immediate payment. As the IRS put in a news release, there been a sharp increase in “aggressive and threatening phone calls by criminals impersonating IRS agents.” In fact, some of these crooks are so clever that they “spoof” the phone numbers to appear as if they are calling from an IRS office.If the IRS has an issue with something on your return they will first notify you via old-fashioned snail mail. If you get such a call, report the incident to the TIGTA at 1-800-366-4484 or at www.tigta.gov.
  • Phishing. Criminals don’t always use the phone. They also resort to emails in hopes of conning you into replying with information or visiting a bogus website that might harvest your information directly or via malware inserted into your computer. Again, remember, the IRS will not initiate an email contact. If the IRS has questions about your taxes, they will send you a letter.
  • Identity Theft. This made the Dirty Dozen list before the Anthem data breach. Now, it probably will rocket to the top of concerns about the taxpayers’ financial safety. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. The IRS is making progress on this front but taxpayers still need to be extremely careful and do everything they can to avoid becoming a victim. The identity theft section on the IRS website has a wealth of information on prevention, detection and assistance for victims.
  • Return Preparer Fraud. The IRS reports that roughly 60 percent of taxpayers used tax professionals to prepare their returns. Ideally, every small business owner will seek guidance from an experience tax professional throughout the year for guidance. In most cases, taxpayers build a relationship with their accountant over time and are able to rely on his or her expertise.However, if tax season rolls around and you find yourself in the market for a preparer, you need to watch out for unscrupulous return preparers. The IRS cautions that there are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. Others will play fast and loose with the tax laws—either through ignorance or avarice. Take the time to interview any potential preparer: ask about credentials, including IRS Preparer identification numbers, and experience with your type of business. The IRS has an online directory of qualified tax professionals, as well as tips on choosing a reputable prepare in the “Choosing a Tax Professional” section of their website.
The Anthem data breach and the problems with Turbo Tax software should be a wake-up call for every taxpayer, regardless of whether you were directly affected. While guarded your identity is important year-round, take the time during tax season to learn more about how to protect your tax identity.