Understanding Tax Identity Theft

Are you ready for tax season? Tax identity thieves and IRS imposters definitely are. That’s why the Federal Trade Commission (FTC) has created tax identity theft awareness week, a time dedicated to providing education on how to reduce your chance of tax identity theft, recognizing the red flag warning signs of IRS imposters, and what to do if fraud happens to you.

To help you to best defend yourself against these thieves and scammers, we’ve gathered some of the most essential information for you here.

What is tax identity theft?

Tax identity theft occurs when someone uses your Social Security number (SSN) to file a phony tax return and collect your refund. If this were to happen to you, it’s likely you wouldn’t find out until you try to file your real tax return and it gets rejected by the IRS as a duplicate filing.

Sometimes tax identity theft occurs in the form of IRS scamming. IRS imposters are scammers who pretend to be calling from the IRS. They claim you owe taxes and demand that you pay immediately, usually by using a gift card or prepaid debit card. These scammers may threaten you’ll face bad consequences such as arrest if you don’t pay. However, these calls are complete lies and any money that you may send to these scammers will be lost forever.

Recognizing the warning signs

Though tax identity theft crimes can be difficult to detect until after the fact, there are still some red flags you can be looking out for. Some potential warning signs highlighted by the IRS include:

• Getting a letter from the IRS inquiring about a suspicious tax return that you did not file.
• Not being able to e-file your tax return because of a duplicate Social Security number.
• Getting a tax transcript in the mail that you did not request.
• Getting an IRS notice that an online account has been created in your name, or that your existing online account has been accessed or disabled when you took no action.
• IRS records indicating you received wages or other income from an employer you didn’t work for.
• Being assigned an Employer Identification Number when you did not request one.

Preventative measures you can take

In order to best protect your personal data from identity thieves, here are five simple preventive measures you can take.

1. Keep your computer secure. Make sure that you’re being safe online. One of the easiest ways you can keep your computer secure is through the use of strong passwords. The best passwords utilize a combination of capital and lowercase letters, numbers and symbols. You can also secure your computer by using updated security software that offers firewalls, virus and malware protection and file encryption.
2. Avoid phishing scams. Never open email attachments unless you trust the sender and know what’s being sent. Don’t install software from unfamiliar websites or disable pop-up blockers. This kind of activity will expose your personal data to phishing scams.
3. Protect personal information. Your personal information is valuable, so treat it as such. Don’t carry around your Social Security card in your wallet or purse – instead, keep it in a safe place. You should also be careful with what you share on social media. Identity thieves can exploit information about new car or home purchases, past addresses, vacations, and even your children and grandchildren.
4. Watch out for IRS imposters. Remember: the IRS will never call to demand immediate payment, nor will they call about taxes you owe without first mailing you a bill. If you experience such a call, you’re talking to a scammer.
5. File your taxes as soon as possible. The best way to avoid having scammers file for a tax return under your name is simply by doing it first. If you file a tax return before fraudsters do, their refund claims are more likely to be rejected for filing under a duplicate Social Security number.

What Grasshopper does to protect you

Protecting your personal data and tax refund shouldn’t be a one person job. That’s why the team here at Grasshopper is also working to help protect you and your account. Beginning at onboarding and throughout your entire time as a client of Grasshopper, we take the necessary steps to protect your personal data and your money. Some of the ways we do this are: 

• Protection at onboarding: While our application process is quick and frictionless, we utilize complex workflows and data systems behind the scenes to verify that all applicants are the people they say they are. The Grasshopper team also takes extra security measures during the onboarding process when needed. This may include requesting items such as driver’s licenses or formation documents to confirm you and your business information. 
• Utilizing two-factor authentication: Having extra authentication required to access your account is one of the many ways we help to keep your online account secure. 
• Validating tax refund checks: The bank may ask you for additional verification to make sure your tax refund checks are legitimate. Some things that might be requested in this validation process include business documents, funds verification, and ID verification. 

What to do if you’ve experienced tax identity theft

If you believe you are a victim of tax identity theft, you should report the activity to the FTC. From there, the FTC can help you to create a recovery plan. They’ll also help you to complete and file an IRS Identity Theft Affidavit (Form 14039) to alert the IRS.