Protecting Your Personal InformationSubmitted by U.S. Wealth Farmington Valley on January 23rd, 2019
The last week in January has been designated as “Tax Identity Theft Awareness Week.” This is a good reminder to all of us about the importance of maintaining the security of your personal information.
It’s become a regular occurrence to hear of data breaches at many major companies. These breaches usually expose your Social Security Number, which is the entry point for most fraud and identity theft. We’ve helped several clients navigate through the issues around identity theft.
Typically, the perpetrator will use that number to create a phony identity—address, income, withholding, etc.—and then file a tax return very early in the process. The return is accepted, and refunds are issued.
Once we file a legitimate return for our client, the returns are rejected. The rejection code from the IRS indicates that a return with one or more of the Social Security Numbers associated with the return we filed have already been used. It could mean that a dependent child has filed and taken themselves as a dependent. It can also mean that someone has used your information to file a fraudulent return.
Now the aggravation begins. We submit a form to the IRS to refute the earlier filing and supply the necessary information to get the refunds owed to our client. The IRS will accept payment if you owe money, but it can take up to six months to get a refund of any money you should receive.
How do you defend yourself against this type of identity theft or against identity theft in general? There are several steps you can take to minimize the likelihood that you will fall victim to fraud, but of course, there are no guarantees.
- Monitor your account balances on a regular basis: bank, credit card and investment/brokerage. This will help you discover any fraud early in the process.
- Use a credit monitoring service. They will notify you of all activity related to your accounts. Again, it’s an early warning, not a prevention strategy.
- Freeze your Credit Score accounts with the major credit reporting agencies. No access, no new/false accounts. This option requires that you “un-freeze” the accounts when you need to apply for new credit or loans.
- Do not use public WiFi or access points unless you have adequate security protections built into your computer.
Finally, file your personal tax returns as early as you can. This will accelerate your refund process but will not affect the timing of your payment. We can file your tax returns in February and schedule your payment for April 15. Early filing is an easy yet important way to combat tax identity theft.