How to Prevent Tax Identity Theft

The start of a new year is a time for fresh starts and new goals, but it’s also the beginning of the oft-dreaded tax season, which means Tax identity thieves are on the lookout for information they can use in order to create fraudulent tax returns. Here are some tips to help protect yourself from tax identity theft during tax season.

File Early to Prevent Tax Identity Theft

Tax-related identity theft most commonly occurs from February to early March because thieves want to beat real taxpayers to the punch by filing fraudulent returns before legitimate ones. Because the IRS allows only one tax return per Social Security number per year, your best defense against identity theft is to file your taxes as early as possible.

Use E-File Instead of Postal Mail

An e-filed tax return arrives instantly at the IRS, which then sends back an acknowledgement receipt. At this point you’ll be notified if there’s any suspicious activity, such as possible identity theft. The quicker you know, the quicker you can deal with it. Before you e-file, however, be sure that your firewall, antivirus, and anti-spyware software are all up to date. If you do send your tax return in by post, think about taking it directly to the post office rather than letting it sit in your mailbox.

Don’t Fall for Scams

The IRS will not contact you by phone, email, or text to ask for personal or financial information. Never give out your Social Security number, passwords, PINs, and credit card or bank information to someone who reaches out via these channels. Official correspondence from the IRS is issued in the form of a letter and sent through the mail. However, scammers are getting increasingly clever, and sometimes phony links can look just like the real IRS website. If you ever have questions about the legitimacy of an IRS related query, your best bet is to call the IRS at 800-829-1040.

Protect Your Financial Accounts

Start by using a different password for each of your financial accounts, preferably one that combines letters, numbers, and special characters. It’s also wise to use a two-factor authentication when available, which requires you to verify your login—typically a code sent via call or text.

How to Report Tax Identity Theft

If you’re a victim of tax-related identity theft, you’ll find out when you try to file your return and learn that a return has already been filed with your Social Security number, or you’ll receive a letter from the IRS stating that a suspicious return using your Social Security number has been identified. If either of these happen, you should do the following:

  • Complete a paper return. As shocking as it is to learn that you’ve been the target of identity theft, you still need to file your tax return. In order to avoid tax penalties or late fees, submit a paper return by the filing deadline.
  • Go to to file a report with the FTC and IRS.
  • File an Identity Theft Affidavit (Form 14039). Fill out and attach this form to your paper return. It will make its way to the Identity Theft Victim Assistance Organization, which will work on your case. Be prepared to submit various forms of documentation proving your identity.
  • Contact the three major credit bureaus—Equifax, Experian, and TransUnion—and ask them to place a fraud alert on your credit records. You should also consider asking them to freeze your credit in case the thief should try to open new credit accounts in your name.
  • Request a copy of the fraudulent return via Form 4506-F. Seeing the fraudulent return will help you determine the specifics of the theft, such as what family information has been compromised.
  • As a precaution, delete any stored credit card numbers from shopping sites and change saved passwords to online accounts.


If you have questions on tax identity theft or would like to discuss your 2019 tax return, please feel free to email me at or call 317.549.3091.

IRS Warns of Continued Phone Scams During Tax Season

Although taxpayers should always be on the lookout for scammers and fraudulent activity, tax season is a time to be especially wary of unknown emails or phone calls. Aggressive phone scams where criminals call posed as IRS officials are extremely common and are a part of the “Dirty Dozen” list of tax-related scams targeting taxpayers. The Dirty Dozen is a list compiled annually by the IRS citing common recent scams taxpayers should be aware of.

How do these scams work? Frauds will make unsolicited calls claiming to be from the IRS and demanding individuals pay counterfeit tax bills. They may also send phishing emails or leave “urgent” phone messages with requests to call back immediately if you do not pick up. If successful, scammers will persuade their victims to send them cash either via prepaid debit card, gift card or wire transfer. Phone scammers often threaten their victims with deportation, arrest or driver’s license repeal in an attempt to bully taxpayers into sending the money.  

To further convince their victims, criminals can modify the caller ID number to appear like the IRS or another federal agency and use IRS employee titles and fake badge numbers to make the call appear official.  Frauds may also refer to the victim’s name, address or other personal information to persuade individuals of their legitimacy. Since October of 2013, the Treasury Inspector General for Tax Administration (TIGTA) has been made aware of 12,716 individuals who, due to phone scams, have paid over $63 million collectively.

The IRS also wants to remind taxpayers that while aggressive and threatening phone calls will always be a strategy used by scammers, especially during tax season, criminals do change their tactics and employ versions of this scam year round.

As a continued reminder, below are strategies frauds will use that the IRS will never use:

  1. Call via phone to demand payment using a specific payment method such as wire transfer. The IRS will mail a bill first if taxes are owed.
  2. Order that taxes be paid without allowing taxpayers to appeal or question what is owed.
  3. Ask for credit or debit card numbers over the phone.
  4. Threaten to include local police or other law enforcement for lack of payment.
  5. Call regarding a refund.

If you receive a call and think you may owe taxes, hang up immediately and call the IRS directly at 800-829-1040. If you know you do not owe taxes or are unsure, do not provide any information over the phone. Hang up and report the call the the TIGTA as well as the Federal Trade Commission. The TIGTA can be reached by phone at 800-366-4484 or on their website on the IRS Impersonation Scam Reporting page. To contact the Federal Trade Commission, go to and visit the FTC Complaint Assistant page and include IRS Telephone Scam in your notes.

Effective Ways to Protect Your Credit After the Equifax Breach

Although Equifax has yet to reveal specifics about the individuals who were affected by their data breach, as many as 143 million Americans may have been impacted. With that in mind, anyone with credit should consider taking measures to protect their identity and funds. Many experts are suggesting individuals freeze their credit, but this may not be the most effective method. While freezing your credit is not a bad decision, it only protects you from new accounts being opened in your name, a form of identity theft that is actually quite rare.

While many taxpayers are now deeply concerned about their lives being destroyed from identity theft, there are many other ways to guard your identity and your money that may be more beneficial than freezing your credit:

  • Use two-step verification and secure passwords
    Most identity theft occurs on existing accounts, so making it difficult for hackers to access your accounts with financial information is one step you can take to safeguard your personal data.
  • Choose ID-verification questions and answers cautiously
    Consider choosing questions whose answers cannot be easily found online. Questions such as “Where were you born?” or “What was your high school mascot?” could be easily discovered by checking your social media accounts, so be wise when creating those protective measures.
  • Monitor current accounts as often as possible
    Ideally, you should check your bank accounts daily to ensure all posted charges were made by you or whoever has access to the account. Since most financial institutions today have an app for accessing account information, monitoring your credit can be as simple as a quick log on from your phone. If you notice suspicious activity, you can then notify your bank immediately to avoid racking up more false charges.
  • Set up alerts for new credit activity
    Although you can set up a fraud alert or credit freeze, there are other free services that monitor your credit and any new account openings or activity.
  • Check credit reports regularly
    Every individual is allowed one free credit report annually from each of the three major credit bureaus through, a site sponsored by the government. You can receive all three reports at once, or request one every 4 months to space out your monitoring tactics.
  • File taxes early
    One form of fraudulent behavior that is becoming more common is filing for taxes under someone else’s SSN. But, organizing your tax information quickly and filing as early as possible could lower the chances that someone will file in your name. Plus, if you are owed a refund, you will likely get it sooner than April if you file early.

While none of these methods are entirely foolproof, taking precautionary steps to protect your credit are always advised. If you do fall victim to identity theft, check out the Federal Trade Commission’s step-by-step recovery guide for helpful information.

Top 12 Social Security Stats You Ought to Know

While a majority of the population is covered by Social Security (SS) to some degree, many do not fully understand the program, resulting in frustration and confusion when it comes time to receive benefits. In an effort to curb miscommunication or misgivings, the Social Security Administration (SSA) has increased its informational output in recent years. The SSA’s 2017 fact sheet provided numerous statistics for future and current recipients, and we’ve outlined the top stats below.

  1. There are 171 million individuals covered by Social Security
    • To qualify for benefits, you must “earn” 40 work credits in your lifetime, with the ability to collect up to 4 credits annually (valued at $1,300 per credit)
  2. 71% of recipients are retired workers (in 2017)
    • SS payouts accumulate 8% from ages 62 to 70, so if you’re close to retirement, a great way to boost your payout is to wait to enroll
  3. The remaining 29% of benefits will go to the disabled and survivors
    • In 2017, approximately 16% of benefits will be received by disabled workers and the remaining 13% goes to survivors of deceased beneficiaries
  4. In 2017, 62 million Americans will receive $955 billion in benefits
    • Funding is acquired from 3 sources: interest on the program’s asset reserves, a 12.4% payroll tax on all earned income and the taxation of the benefits themselves
  5. 61% of seniors rely on their SS benefits for at least half their monthly income
    • 48% of married seniors and 71% of unmarried retirees depend on Social Security for at least half their income
  6. Of unmarried seniors, 43% rely on benefits for about 90% of their income
    • Close to half of single seniors look to Social Security to provide the majority of their income each month
  7. Most 65 year olds will live approximately 20 more years
    • In 1960, the average life expectancy was 70, but it has since increased to 79, which means it is wise to factor in a longer lifespan since the program is only intended to account for 40% of wages in retirement
  8. By 2035, the senior population is set to grow by 65%
    • Currently, those 65 and up number 48 million people, but the impending retirement of many baby boomers means that number could grow to 79 million over the next 18 years
  9. By 2035, the worker-to-recipient ratio will decline by 21%
    • Presently, the worker-to-beneficiary ratio is 2.8-to-1, but experts estimate that ratio could drop to 2.2-to-1 in the next 18 years
  10. In the event of a long-term disability, about 90% of workers have protection
    • While 67% of the private workplace does not offer long-term disability insurance, Social Security covers approximately 90% of workers ages 21 to 64 in the event of a work ending disability
  11. Of workers ages 20 to 49, about 96% do have protective insurance for survivors
    • Since one in eight 20 year olds won’t live to see age 67, at least the majority of those who work in covered employment have survivors protection insurance for surviving spouses and children
  12. One third of workers report having nothing set aside for retirement
    • With a potential 23% cut in benefits in 2034, the fact that 31% of the current working population has no money set aside, leaving them fully reliant on Social Security, is less than promising

In conclusion, although Social Security will be around for the long run, and likely covers more income than many believe, it would be wise to find secondary funding for retirement since Social Security was never intended to serve as your principal source.

IRS Changing Phone Policy

For years, taxpayers have been told that the IRS will never call to inquire about their taxes or collect unpaid funds. Rather, the IRS has operated under the communication policy that they will contact taxpayers by written notice only. However, immediately following this year’s tax season, in April 2017, the IRS enacted a change in their policy to begin calling individuals with overdue tax bills, but there are specifics to when or why they will contact you via phone.

Unfortunately, as many of us know, dozens and dozens of scam artists exist in today’s world, who will surely be attempting to capitalize on this new policy to con you out of your own money. With that in mind, we have assembled some information regarding the new policy to help you recognize when you’re actually being contacted by the IRS, and when you’re being scammed.

  • The IRS has contracted out 4 private collection agencies: Conserve, Pioneer, Performant, and CBE Group
  • These agencies will only call individuals with long overdue taxes, namely those with accounts who have not interacted with the IRS in more than 365 days. Thus, if you were a bit late on your April 2017 taxes, you didn’t receive a call in May, and won’t unless they go unpaid through April 2018.
  • The IRS will still send written notices first stating your account is being turned over to a collection agency
  • There are many practices or tactics used by scam artists over the phone that the IRS will never follow, even when calling though their contracted collection agencies. The IRS will NOT:
    • Threaten to deport you, foreclose your property or withdraw your license
    • Threaten to bring in law enforcement or other agencies to arrest you for lack of payment
    • Demand payment without allowing you to inquire against or appeal the amount owed
    • Request immediate payment over the phone. They will never call without sending a bill or notice via mail first
    • Ask for credit or debit card numbers over the phone
    • Demand a certain form of payment (i.e. a wire transfer, prepaid debit card or iTunes gift card)

If you think you have been scammed, or have an issue with one of the contracted collection agencies, the IRS suggests contacting the hotline for the Treasury Inspector General for Tax Administration at 800-366-4484, or visit If you do receive a call from someone claiming to be from the IRS and are concerned with the validity of the call in any way, do not send funds. If you have questions about owing taxes or would like to confirm that a call you received is legitimate, contact the IRS directly at 1-800-829-1040.

TIGTA: IRS Can Take Action to Recognize/Investigate Fraud Indicators

By better ensuring that fraud indicators are recognized and properly investigated during field audits of individual tax returns, the IRS could increase revenue by an estimated $20 million a year, according to a report publicly released by the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA’s audit was initiated to determine whether fraud is recognized and pursued in accordance with IRS procedures and guidelines during field audits of individual tax returns. They found that:

Of the 116 field audits closed between July 2009 and June 2010, twenty-six audits with fraud indicators were not recognized and investigated.

Each of the field audits involved unreported income and/or overstated expenses that resulted in the taxpayers agreeing they owed additional taxes of at least $10,000.

“Our review found that a combination of factors caused indicators of fraud to not always be recognized and properly investigated,” said Treasury Inspector General for Tax Administration J. Russell George. “Because of this, the IRS may be missing opportunities to further promote voluntary compliance and enhance revenue for the Department of the Treasury,” he added.

In its report, TIGA recommended that in order to assist examiners, the IRS should list in the Internal Revenue Manual (IRM) the following six categories of fraud indicators:

  1. Income
  2. Expenses or deductions
  3. Books and records
  4. Conduct of taxpayer
  5. Methods of concealment
  6. Income allocation

Each category, in turn, would contain specific examples of supporting behavior that range from:

  1. Omitting income
  2. Overstating expenses that are substantial
  3. Failing to keep adequate records in an attempt to hinder the audit
  4. Making false statements
  5. Failing to disclose relevant facts to an accountant

TIGTA recommended that the Director, Exam Policy, Small Business/Self-Employed Division:

  1. Enhance the job aid examiners are required to maintain in audit files related to documenting and investigating fraud indicators.
  2. Provide specific examples in the IRM for examiners and first-line managers to use when considering whether to consult IRS technical advisors when field audits of returns suggest possible fraud.

IRS officials did not agree with the first recommendation. They indicated that the job aid (Fraud Development Lead Sheet) was significantly enhanced in March 2011. In addition, IRS officials did not agree with the second recommendation, but stated that they do plan to take alternative corrective action. IRS officials will issue a memorandum to all examination employees emphasizing the importance of involving the technical advisors in audits.

As part of the review, TIGTA evaluated the enhanced Fraud Development Lead Sheet and continues to believe further enhancements to it would be beneficial.

TIGTA considered the alternative corrective action IRS officials plan to take and concluded that it is responsive to the recommendation. However, TIGTA encourages IRS officials to go beyond merely reiterating existing procedures in their memorandum by providing additional instructions and guidance to clarify when the assistance of a technical advisor should be sought.

IRS officials agreed that TIGTA’s recommendations have the potential to increase revenue by some $19.7 million over a year ($98.5 million over five years) from approximately 1,872 field audits.

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