July 24th, 2018 Dominique Molina (Taxloopholes.com Tax Strategist)
When major organizations experience a data breach, it is front page news. However, these occasional reports don’t show the magnitude of the issue. Thousands of companies have security lapses every year, exposing your tax ID and other sensitive information to misuse. Even the IRS is not immune from the impact of identity theft. The annual cost of tax ID fraud is more than $6 billion.
Protecting your information is critical, but it is also important to know how to recover if you become a victim. Our new release, The Great Tax Escape, offers tips on prevention, as well as expert guidance for getting your life back on track if your identity is stolen.
The Impact of Tax ID Theft and Fraud on Taxpayers
Tax ID theft and fraud comes with a $6 billion price tag, which is eventually passed on to taxpayers. Because the problem is so extensive, the IRS has created comprehensive strategy for investigating and addressing identity theft.
One of the most common issues facing the agency is tax refund fraud, which is investigated by IRS Criminal Investigators through the Questionable Refund Program (QRP) and the Return Preparer Program (RPP). These programs are designed to combat instances in which individuals file returns using stolen or false information to obtain unearned refunds or tax preparers steal personal data from current or former clients and direct refund deposits to their personal accounts.
If your information is used in these types of scams, you can expect notification from the IRS, along with step-by-step instructions to recover from the incident. Your Certified Tax Coach is also an excellent resource when it comes to reclaiming your identity and correcting related problems.
Keeping Your Personal Information Safe
Understanding how criminals gain access to sensitive data is helpful in your prevention efforts. For example, one of the most popular methods of securing bank and credit card account numbers is simple dumpster diving. Would-be identity thieves go through discarded paperwork in hopes of finding statements, paystubs, and other data-rich documents, then they use the information themselves or sell it to other rogue characters for profit.
Other common methods of getting confidential information include mail theft, purse and wallet theft, and shoulder surfing. This technique involves standing just a bit too close while you type in your PIN number, so that the thief can see the information over your shoulder.
The transition to digital record-keeping and the trend towards online shopping, investing, and banking has opened up an entirely new set of risks to your tax ID. Cyber-criminals use sophisticated phishing, social engineering and pretexting schemes to trick you into handing your data over. Some have the knowledge and skill necessary to get through your security software, and snatching information from open wireless connections is all-too-easy for those with experience.
If you do become a victim of tax ID theft, consult your Certified Tax Coach immediately. Fast action can prevent some of the damage. The IRS also has an entire guide dedicated to this issue, including contact information for the three primary credit reporting agencies.
For more information about preventing identity theft – and recovering from the experience if you do become a victim – click here for your copy of The Great Tax Escape.