Just imagine robbing a bank on the one day that millions of people have made a deposit amounting to billions of dollars.
April 18, or Tax Day 2016, is that one day this year for a certain type of scammer. A particularly pernicious form of fraud, tax-related identity theft is when someone uses sensitive personal information (such as your Social Security number) and files a fraudulent tax return in your name to collect a refund.
According to recent statistics, scammers filed more than five million returns in 2013 using stolen information, costing the IRS $5.8 billion in fraudulent refunds. Most victims don’t realize that anything is amiss until they file, only to be notified that a return has already been filed in their name.
I’ve experienced this firsthand. Last year, someone filed a fake tax return under my Social Security number. At first glance, I was hoping someone was generous enough to pay my taxes for me — my lucky day!
But by no fault of my own, the outcome is much more cumbersome. I can no longer file a tax return electronically. I had to actually, physically, go down to the IRS office just to get a copy of my transcript to refinance my mortgage.
My identity, like that of millions of Americans, was compromised by scammers seeking to defraud Uncle Sam. And there are plenty of scammers out there. Recent reports indicate that more than 900,000 people received phone calls, seemingly from the IRS, asking them to verify their bank account number for their refund or demanding payment. Nearly 4,550 victims have collectively paid over $23 million as a result of this scam.
Scammers have made Tax Day go from unpleasant to nightmarish. Now, not only do we have to write a check, but we also have to worry about who else, besides the government, could be reaching into our wallets.
To decrease the chances that you too will be scammed, follow these simple steps:
• The federal government will never call you demanding payment on taxes owed. (They are far more likely to send a guy in a nice leather jacket with a set of handcuffs.) Never give your personal information, including your Social Security number and date of birth, to anyone over the phone.
• Get a shredding machine and make sure that your devices — laptops, cellphones, etc. — have encryption tools to protect your account numbers and other personal information.
• Seek out a financial professional who can properly calculate what you owe in taxes and suggest ways to reduce your payment and avoid a large refund, which can attract scammers.
Don’t let April 18 get you down. Remember: Tax Freedom Day — the day when the average American stops earning money to pay taxes and starts earning money for him- or herself — is right around the corner, on April 24.
*John E. Girouard, author of “Take Back Your Money” and “The Ten Truths of Wealth Creation,” is a registered principal of Cambridge Investment Research and an Investment Advisor Representative of Capital Investment Advisors in Bethesda, Maryland.*