An increasing number of taxpayers find that instead of receiving a refund, they get a rejection from the IRS that informs their return has already been filed and the check has been issued. Here are some tips on how to avoid tax return filing fraud.

Tax return filing fraud

It can happen to anyone. Someone can steal a refund by using a social security number to file. With that personal information, they can either create a fraudulent W-2 or, as is often the case, find a W-2 on the dark web or steal it from the employer.

Last year alone, billions of records that include personal identifying information (PII) such as social security numbers, names, and dates of birth, were exposed online. Bad actors use phishing emails (emails that contain links or attachments that can install malware) or voice calls (vishing) to either steal information or persuade a person to volunteer it. Armed with enough information to file a fraudulent tax return, the bad actors may file the taxes or sell the information to other fraudsters over the Internet. Identity thieves then use personal information to file fraudulent tax returns.

Social security numbers and other personal information could have been exposed by an employer, a financial institution, a medical provider or a personal computer subject to unauthorized access by a hacker. Although this database doesn’t contain every occurrence, individuals can enter an email address here to see potential breaches haveibeenpwned.com.

Bad actors also employ old fashioned dumpster diving and mailbox theft to obtain personal information. Receipts or duplicates of confidential documents contain personal information and thieves aren’t above obtaining tax returns addressed to the Internal Revenue Service from a mailbox.

Preventing Tax Return Filing Fraud

• File the return early. Consider tax time as a race against fraudsters.
• Protect personal information.
• Share only information necessary with third parties.
• Use passphrases that contain at least four random words and/or employ multifactor authentication whenever it’s available. Multifactor authentication requires a combination of something known, like a password or answer to a unique question, something sent, like an instant message to a phone, and/or something biometric, like a fingerprint or face scan.
• Shred documents that contain sensitive information and, when sending mail that contains personally identifying information, send it through a secure United States mail facility.
• Choose a reputable tax preparation service. Many services pop up around this time of year promising guaranteed refunds, advances on refunds, and cheap rates. However, those tax preparation services may not be using optimal data security. Err on the side of choosing a tax preparer with a solid reputation that has been in business for a while and whose integrity can be verified by checking with the Better Business Bureau or state licensing authorities.
• Be alert to phishing, vishing and tax scams. The IRS will not call and demand payment or personal information. Law enforcement agencies, particularly the IRS, will not email or call and say they have a warrant for an arrest unless a payment is made immediately. Always confirm official-looking or sounding communications with the actual agency, not the number listed in the email or letter.

What to do if the IRS rejects a return, saying it has already been filed

Call the IRS Identity Protection Specialized Unit to report the fraud at 800-908-4490. File a police report with local authorities and an IRS ID Theft Affidavit Form 14039 with the IRS. Although the refund will be delayed, the refund should be sent once the fraud is verified.

To avoid further identity theft, place a freeze on credit. Freezing credit will prevent anyone from accessing credit reports, including creditors. Putting a freeze on credit will require an unfreeze to apply for credit, which can be time-consuming. A fraud alert can be placed on credit reports, which does not require an account unfreeze, but an alert encourages creditors to call and verify identities before approving a credit application.

An identity protection PIN from the IRS can be obtained in eligible states or for confirmed tax identity theft victims. When anyone tries to file a tax return with that name the PIN will be required or the e-file return will be automatically rejected and a paper return will be delayed until the IRS verifies it.

Check credit scores regularly and watch for sudden changes. Most credit card companies and major credit reporting bureaus provide this as a free service, although there may be a limit on how often it can be accessed. A credit report can be obtained for free once a year.

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