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Protect Yourself from Tax-Related Identity Theft

Tax fraud and identity theft often go hand in hand. By understanding how tax identity theft occurs, you can take steps to safeguard your personal information and finances this tax season.

What is tax fraud? 

Tax fraud is the deliberate attempt to defraud the IRS or to evade tax reporting. 

What is identity theft? 

Identity theft is a crime of using someone else’s personal information without their permission. 

How is tax fraud related to identity theft?

Tax fraud is closely linked to identity theft when an individual unlawfully obtains your personal information, such as your social security number, to file a fake tax return and claim a refund in your name. This is referred to as tax-related identity theft. 

Criminals often file early, aiming to submit the fraudulent return to the IRS before the legitimate one. By the time the victim files their return, the scammer may have already received the refund. Usually, the victim only becomes aware of the fraud when they receive an IRS notice stating that a return has already been filed and a refund issued.  

Over time, criminals have developed new ways to commit tax-related identity theft. Here are some of the common scams they use to obtain your personal information:

  • Phishing emails. These emails often look like they’re from the IRS asking you to verify information. They persuade you to click on a link or open an attachment, which leads you to a fake website that mimics a trusted brand. They can also install malware on your computer or device in attempts to steal your personal and financial information.  
  • Social media scams. Scammers may use social media in attempts to trick you into giving them your personal and banking details. They may create fake profiles or post fake ads claiming that you can receive a larger return if you sign up for their “tax services.”  
  • Data breaches. Scammers conduct cyber-attacks and physical theft to obtain your information, which is used to submit fraudulent tax returns.  
  • Phone scams. Scammers may call you purporting to be from the IRS or another government agency. They may threaten you with arrest or legal action if you do not share your personal information or send them money.  
  • “Ghost” tax preparation scams. Scammers posing as a tax preparer pretend to file your taxes. They may leave mistakes on the return, may use exceptions that don’t apply, never file a return or file a fraudulent return in your name. 

Warning signs that you may be a victim of tax fraud

  • You receive a notice from the IRS that more than one return was filed or that you didn’t declare all of your income based on wages from an employer or job that you are not familiar with.
  • You receive a 1099-G for unemployment benefits you didn’t apply for.
  • You receive an IRS notification regarding an online account you did not create. 

Steps to protect yourself

  • File early in the tax season. This reduces the chance of someone filing a fraudulent return before you.
  • File digitally using legitimate tax software and a secure computer. Filing digitally reduces the chance of a paper tax return from being stolen out of the mail.
  • Request an Identity Protection PIN from the IRS. This six-digit code can block someone who has obtained your social security number from filing a fraudulent tax return in your name. This is a second way the IRS can verify your identity.
  • Conduct research on reputable tax preparers in your area. Consider verifying their business through the Better Business Bureau. All verified tax preparers have an IRS Preparer Tax Identification Number (PTIN), which you can request from the preparer. You may also search for legitimate tax preparers on the official IRS directory.
  • Be suspicious of any phone calls or emails claiming to be from the IRS. The IRS will never contact you by email or phone to ask for your personal information.
  • Keep a watchful eye on incoming mail. Consider signing up for Informed Delivery, a free service through the United States Postal Service.
  • Do not carry your social security card or those of your family members. Keep them in a secure location inside your home. Don't give your social security number to unsolicited callers or enter it into websites you don't trust. 

Remember, the IRS will never call you demanding payment by gift card, wire transfer, cryptocurrency, payments on social media or prepaid debit card. They will also never threaten to have a taxpayer arrested for non-payment.

Resources 

Tax fraud is a serious crime. If you suspect you have been a victim, it is important to take action and report it to the IRS and Federal Trade Commission.

IRS

Federal Trade Commission

Texas Capital

For additional fraud prevention resources, please visit our Fraud Prevention Security Portal.