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Tax Identity Fraud

| August 24, 2015
Tax Issues

The threat of identity theft was already bad enough, yet now we even have to worry about it when filing our taxes: The latest news from the IRS, released on August 17th, reported that thieves used personal information acquired elsewhere to access IRS website tax records and actually succeeded in about 220,000 cases. (It is interesting to note - according to an AP report dated the 17th – that within those cases “655 tax refunds were sent to a single address in Lithuania and 343 refunds went to a lone address in Shanghai.”) So in case you might be thinking, "It won't happen to me," you may want to think again. Within our close knit number of individuals and families we work with, two tax identities were stolen this year this year alone!

The good news, if you want to call it good news, is that the reason for the tremendous amount of theft in such a short period of time was due to a breach in the IRS's system by hackers. The bad news is that even without this breach, millions of dollars in tax identity fraud have occurred this year.

The IRS is working diligently to tighten their systems; nonetheless, I would strongly suggest tightening your system just in case you are next. Here are 4 simple tips to get you on the right track:

The first - and what I would say is the most important - thing to do is to protect your social security number. When a thief obtains your social security number, he or she can do with your financial life as they please. He can open credit cards, buy a car, assume any other kind of debt, and, yes, file your taxes. So be wary about who needs it and why. It is not always necessary. For instance, your doctor's office may ask for it, but they don't need it. They probably use it as a form of identification; however, they can file your insurance and attend to you with simply your date of birth. So #1... do not hand out your social security number like candy at Halloween.

#2....Shred and burn, shred and burn, shred and burn. We are all busy. It is easy to simply throw things in the trash, but there really is such a thing as a dumpster diver. If it has personal information on it, find a way to shred it or burn it.

#3...Use secure access sites or secure access payment services when purchasing on the web. I know you are probably wondering how this could lead to tax identity fraud. Well, hackers are amazing at finding one little crumb and hunting down the loaf of bread. The last thing you want is them using that one little crumb to access ALL of your private information.

Finally, get in the habit of monitoring. There are two things to monitor--your credit report and now the IRS' online system. I would suggest setting an alarm on your calendar once every quarter to visit and to see if there is any suspicious activity. You will be allowed to download each of the three credit agency's reports once annually for free. You can view your submitted tax returns online as well. So, last but definitely not least: #4....take 20 minutes a quarter to protect 365 days of the year.

That wasn't so painful, was it? Like an apple a day to keep the doctor away, these little tips are more of a lifestyle tweak than a laundry list. What would be painful and time consuming would be ironing out a falsely filed tax return with the IRS. Bottom line: Eat your apple!