3 Ways to Protect Your Tax Refund from Identity Thieves

The beginning of tax filing season is right around the corner, and odds are that you are one of the 90% of Americans who file your taxes online. As the number of people who file online increases, so do the number of fraudulent returns. For the 2017 tax season, the IRS reported that there were 597,000 tax returns filed with six billion dollars protected from becoming fraudulent refunds.

While no evidence suggests filing online increases taxpayers' chances of becoming victims of tax identity theft, it does seem that filing fraudulent returns online is easier for criminals than other forms of tax fraud. To file a fraudulent online return, all criminals need is a name, date of birth and Social Security number. Then they forge a W-2 and e-file with ease, knowing that the IRS doesn't verify returns before paying out refunds. The first time the IRS becomes aware of the problem is when a second return is submitted for the same taxpayer.

So what can taxpayers do to protect their identities and tax refunds? Here are three actions you can take to increase your chances of a theft-free tax season.

1. Protect yourself year-round.

The tax identity theft process can begin months before criminals file your taxes. Cybercriminals constantly search underground websites for Social Security numbers and other personal data that has been mined from various accounts and sites. The more of your data they find throughout the year, the more likely you are to be a victim of identity theft. One way to know if and when your information appears on these sites is to use an internet surveillance program that regularly scans the web for any suspicious activity.

2. File as early as possible.

Because the IRS operates on a "pay refunds first, ask questions later" model, the sooner you file, the less likely someone else will file in your name before you do. If a criminal does beat you to the punch, the IRS estimates it will take 120 days to resolve your case.

3. Be smart about scams.

A popular tax scam involves criminals posing as IRS employees and calling taxpayers to tell them they owe the IRS money. They demand payment by wire or a prepaid debit card. Keep in mind that the IRS generally contacts taxpayers by mail, never by email, phone call or text. The IRS also doesn't specify forms of payments. If you are contacted by someone claiming to be from the IRS and think it's a scam, contact the IRS Identity Protection Specialized Unit at 800-908-4490.

An ARAG legal insurance plan can help you further protect your identity at tax-time and year-round. Our comprehensive plans include identity theft coverage that provides plan members with internet surveillance and credit monitoring, in addition to access to network attorneys and specialists. And, if you have questions regarding your taxes, ARAG can help with that too, by offering tax services to assist with personal tax return preparation.