Notes

5 Ways to Really Secure a Tax Refund from Identity Fraud

Here are Chapman’s top five recommendations for really preventing Stolen Identity Refund Fraud from affecting you.

1. File Your Tax Return in January. This is your absolute best defense. If you have all your tax records, you should file your tax return as soon as the IRS starts to process tax returns, this year on January 20th. If you have already filed your return and an identity thief attempts to file a fraudulent tax return later, the fraudulent tax return will be rejected. First one to file wins.

2. Make a Claim On Your IRS Account Right Now. If you can’t file your return now, SecureTaxRefund.com offers a patent pending process that places a claim on your account without having to immediately file your tax return. They provide the IRS with notice of your claim on your account along with a nominal deposit from you (under $10), which you get back with your refund. If anything goes awry, they warranty their service and will take care of the administrative details to get your refund to you as soon as possible and clean up your account.

3. File Your Tax Return Early Based Upon the Best Information You Have. If you do not have all your tax documents, you could file a tax return based upon your best estimate. For example, your paycheck stub may be an adequate substitute for your W-2. You can then file an amended return (Form 1040X) once you have all your tax documents. It is much more difficult to do your taxes this way, but you would have a return on file before the identity thief. This is not recommended for complex returns. Many tax professionals believe that filing 1040X increases your likelihood for an audit. You can’t e-file Form 1040X, so prepare to wait longer for any additional monies owed you. If your estimate is wrong, you could be required to pay.

4. Paper vs. E-file: Choose Paper. Tell your tax preparer you don’t want to e-file, and you will file a paper return by mail. That way, if your tax preparer defrauds you, (it happens more than you think) the IRS will write you a replacement check. If you E-file, the IRS will direct you to collect from your preparer. There is a little extra paperwork, you will have to buy some stamps, and you will wait longer for your refund, but at least you will know that you are getting your refund.

5. Reduce the Size of Your Refund. It’s too late to do this for 2014 taxes, but if you consistently get a large refund every year, you can adjust your withholdings and get your refund in small chunks with every paycheck. If an identity thief does file a fraudulent return against your account, you will not lose as much money. If you count on a big refund to fund large purchases, you will have to start a regular savings regiment instead. If you make a mistake you could owe money. You may still have to deal with the IRS to correct your account.