Every year it seems that tax identity thieves get a little bit more brazen about swindling individuals out of their hard-earned tax refunds. Last month the IRS published its list of the"dirty dozen" tax scams that included classics like phone scams, phishing, and return preparer fraud. The IRS’ efforts to warn people about the dangers of dishonest or downright criminal fraudsters have been forced by the fact that tax identity fraud has become one of the fastest-growing type of identity theft, according to the Federal Trade Commission.
In fact, as millions raced to file their returns — 52 million so far this year — fraudsters also marked the beginning of tax season by kicking off something much more sinister: tax identity theft season. From 2011 - 2014, identity thieves claimed $23 billion in fraudulent tax refunds. In 2015 alone, tax identity thieves defrauded nearly a quarter million of Americans!
For those who fall victim to tax identity fraud, a letter from the IRS is often their first inkling that they’ve been defrauded. These letters typically tell a consumer that their refund was not accepted because someone else has already filed in their name. This can set off months of delays in obtaining a refund while the IRS investigates the case. For working families who depend on getting that refund check, this can wreak financial havoc.
The IRS is working hard to warn consumers to beware of these scams, but education is only half the battle. They are also fighting scam artists behind the scenes and have made significant inroads reducing tax identity fraud rates. Many of the IRS’ new safeguards are invisible to taxpayers but invaluable in fighting against tax ID fraud. Its efforts have stopped more than 1.4 million fraudulent returns, totaling more than $10.9 billion.
However, one of those not-so-invisible tools the IRS uses to catch fraud has caused delays for a portion of the 152 million refunds expected to be filed this year. The Protecting Americans from Tax Hikes (PATH) Act provides the IRS with more time to stop scammers before a fraudulent check is ever mailed, but requires the agency to hold refunds for consumers who claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC). Fortunately, the wait is finally over and those impacted began receiving their refunds last week. Those EITC and ACTC recipients still waiting for their refund can track it online, and those yet to file can expect to have their refunds processed within the standard 21-day processing window.
For consumers who have yet to file their return, I would tell them not to wait! Yes there are six weeks left before the end of tax season, but every day consumers wait is another day fraudsters can beat them to filing their returns. The most important message I have for the 100 million who’ve yet to file is this: the sooner you file, the better. For anyone receiving a refund, the easiest way to reduce the risk of fraud is to file now.
Whether you’re struggling with tax season anxiety or are simply looking for a helping hand in filing your taxes ASAP, consumers should look to IRS free tax preparation resources to help prepare accurate returns and navigate new laws designed to reduce fraud.