Despite recent improvements in combatting identity theft, its continued high rate warranted placement on this year’s top IRS “Dirty Dozen” tax scams.
In a recent Gallop Poll, 23% of Americans reported that they or someone in their household fell victim to identity theft in 2018. Although the stats are down from 25% the previous year, the numbers are still sufficiently alarming to warrant placement of identity theft on the IRS Dirty Dozen list again this year.
Identity thieves are creative and resilient individuals who are constantly changing their tactics as they are discovered. Be attentive to any attempt to obtain your personal identifying information, particularly on the internet. This information may be used by scammers to make purchases and/or conduct tax return fraud – eventually ruining your credit rating.
Some new identity theft strategies include the following:
Synthetic identity theft
Synthetic identity theft is a sophisticated kind of identity theft that involves combining your social security number with other people’s (or fake) names, birth dates, and addresses, in order to create a brand-new identity. This new identity – based on your social security number – is used to build credit, open new credit cards, and create other fraudulent accounts. This is a very difficult kind of identity theft to identify and prevent, since the victim never receives any statements. It is also one of the most damaging, since by building up good credit (on your identification number), the thief can make increasingly larger fraudulent purchases over time and do a lot more damage in the long run.
The Internet of Things
The Internet of Things (IOT) is the convergence of interrelated physical devices such as cell phones, smart home devices, wireless sensor networks, and other technologies that communicate over the internet and can be remotely monitored and controlled. IOT is now a major target for hackers who use these devices to track and gather your personal information.
How to protect yourself from identity theft
Taxpayer awareness is the first line of defense in identity theft prevention:
- Safeguard your personal information! Don’t leave your personal data where anyone can see it – make sure that your mailbox is locked, shred all financial documents and pre-approved credit card offers that you don’t need, don’t carry your social security card around with you, and don’t give out your personally identifiable information online or over the phone unless you are the one who initiated the contact.
- Protect your computer and cell phone. Install and maintain up-to-date antivirus software, block unauthorized access with firewall protection, use strong passwords (change them frequently), and encrypt your private records.
- Be suspicious. The IRS and financial companies do not contact people asking for their private information, either directly or through links to their websites. Be on the lookout for phishing emails, fake text messages, and phony phone calls. Don’t click on a link or download an attachment unless you were the one that initiated the request. If you shop on the internet, do so only on secure websites.
How to report identity theft
If you are a victim of identity theft, immediately do the following:
- Place a fraud alert with at least one of the three major credit reporting agencies (Equifax, Experian, and TransUnion). Check all of your credit reports for unauthorized transactions.
- Notify the bank or other financial institution where the fraud occurred.
- Report the identity theft to the Federal Trade Commission (FTC) and your local police department.
Our review of the 2019 IRS Dirty Dozen tax scams continues with tax return preparer fraud.