Protect Yourself Against Tax Season Scams: Your Essential Guide
As we approach tax season, it’s crucial to stay vigilant against the sophisticated tactics that scammers employ to exploit unsuspecting taxpayers. At Extreme Investor Network, we’re dedicated to equipping you with the knowledge you need to safeguard your finances against fraud. This article will delve into essential strategies that can protect you during this vulnerable time of year.
Tax Season: A Prime Target for Scammers
Every year, millions of Americans share sensitive personal and financial information in their tax returns, making tax season a gold mine for fraudsters. According to recent studies, Americans lost an astounding $9.1 billion to tax and financial crimes in just the past year. It’s a stark reminder from experts like Jennifer Hessing, a fraud analytics director at Wells Fargo, that anyone can become a victim.
Hessing herself experienced firsthand the consequences of tax-related identity theft, when cybercriminals filed a tax return in her name using stolen information. Fortunately, the IRS flagged the fraudulent return, and Hessing took proactive steps—such as establishing an Identity Protection PIN (IP PIN)—to prevent future occurrences.
Take Charge: Set Up Your Identity Protection PIN (IP PIN)
One of the most effective defenses against tax fraud is setting up an IP PIN. This unique six-digit number verifies your identity when you file your taxes, effectively blocking anyone from submitting a return using your information without it. Victims of identity theft can receive a new IP PIN each year, but don’t wait until you’re a victim—take action now!
Here’s how to set it up:
- Visit the IRS website and complete the required identity verification process.
- Your spouse and dependents can also obtain an IP PIN after verification.
- Keep this number secure and do not share it.
By taking this simple proactive measure, you’re significantly reducing the risk of becoming a victim of tax fraud.
Be Skeptical: Ignore Unexpected Tax Emails or Texts
Scammers often create a sense of urgency to lure victims, sending emails or texts that seem to be from the IRS or other tax services. Experts advise ignorance is the best response to these unsolicited communications. The IRS does not initiate contact via email or text about tax issues. If you receive an unexpected message, do not click on any links. Verify the message by visiting the official IRS website or consulting with a trusted tax professional.
Remember: legitimate tax professionals won’t threaten immediate legal consequences or demand instant payment for alleged tax debts.
Cryptocurrency: A Dangerous Playground for Scams
The rise of cryptocurrency has attracted not just innovative investors but also fraudsters. Some scammers are targeting individuals by suggesting that taxes can be paid with cryptocurrency, or that paying with crypto can lead to extended deadlines or discounts. These claims are utterly false. The IRS currently does not allow federal tax payments in cryptocurrency, and using digital currency lacks the safeguards typically present in bank transactions.
If you’re approached with such offers, treat them with suspicion. Once you pay with cryptocurrency, those funds are typically irreversible.
Elevate Your Cyber Hygiene
In today’s digital landscape, maintaining strong cyber hygiene is crucial. Here are essential tips to bolster your online security:
- Create unique passwords for each of your accounts.
- Enable two-factor authentication to add an extra layer of security.
- Monitor your financial accounts for unusual activity regularly.
- Reach out to your financial institutions to understand what security measures they offer.
Good cyber hygiene is not just about protecting your data today; it fortifies your financial future.
What To Do if You’ve Been Scammed
If you suspect you’ve fallen victim to a scam or your personal information has been compromised, it’s vital to react swiftly:
- Report the incident to the Federal Trade Commission (FTC) at IdentityTheft.gov.
- If your Social Security number was stolen, you must contact the IRS.
- Submit an Identity Theft Affidavit if you find fraudulent tax returns filed in your name.
- If a tax preparer misused your information, file a Return Preparer Complaint with the IRS.
Remember, you’re not alone; there are resources available, including the VSAFE program, which provides information tailored for veterans and service members impacted by these scams.
Final Thoughts
This tax season, equip yourself with the knowledge and precautions necessary to protect yourself against potential scams. By implementing the strategies outlined above, you can take control of your financial future and mitigate the risk of falling victim to tax fraud.
For more insightful guidance on mastering your finances, don’t forget to explore our Money 101 course, delivered weekly straight to your inbox, helping you on your journey towards financial freedom. Sign up today—your future self will thank you!