Over the past couple of years, tax fraud and identity theft have been on the rise. We have tried to warn everyone when a new scam comes up. We’ve covered many ways thieves have used to steal your money and/or your identity. There have been phone calls demanding money, the IRS has been hacked into, and most recently fraudulent tax returns have been filed. There is a way you can minimize the likelihood of someone filing a fraudulent tax return in your name. File early.
How are thieves able to pull this off?
Employers are required to file W-2 forms to their employee and the IRS each year. They must send the W-2 forms to the employees by January 31st but they don’t have to file them with the IRS until the end of February. That means there is one month where a tax return can be filed before the IRS gets the forms, they have no way of verifying that there is going to be a W-2 form to match it.
So if a thief has stolen a taxpayer’s identity, they use the that person’s name and social security number to make fake W-2 forms and file a fake tax return so they can steal large refunds. They start in January as soon as the IRS starts accepting tax returns. If the taxpayer waits until after the end of February to file their return, their tax return will be rejected because the tax return has already been filed n their name and social security number.
To correct this, the real tax payer has to mail their tax return to the fraud division of the IRS. They will receive a letter from the IRS and they must call the IRS to verify their identity. Then they will receive a PIN that they must use to file for the next three years. This process takes weeks sometimes months to complete which also delays refunds.
Again, the best way to avoid this particular scam, we suggest you file your tax return as early as possible.