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Hacking Your Finances: Avoiding Tax Fraud

Hacking Your Finances: Avoiding Tax Fraud

A gentleman by the name of Benjamin Franklin recently called my mother. He claimed to be from the IRS and was reaching out to collect payment on a tax bill. Knowing that they were up to date on their taxes (and thanks partially to the tip-off from Mr. Franklin’s clever moniker), my mom assumed it was fraud. But when she called the IRS to verify, she found out that not only was the call fraudulent, but someone had filed a tax return in my parents’ names (using their real Social Security numbers) and had tried to get a refund.

Identity theft has been on the rise, and thieves have gotten increasingly clever at obtaining sensitive data and using it in even more creative ways. To keep yourself as protected as possible, here are some tips to keep you from being a victim of tax fraud.

Helpful Tips

File your taxes early: Many fraudulent tax returns are filed early, so the sooner you file, the sooner you can either beat the bad guys to the punch or discover that something is wrong.

Guard your Social Security number: Do not carry your Social Security card with you or supply it to anyone unless it is absolutely necessary (say, for a loan application). Anytime I am prompted for my number, I decline to provide it. Only if the institution really needs it will they request it a second time.

Keep personal data private: Many fraudsters scare the people they call with threats or lies. It’s easy to get rattled and provide the caller with information like your mother’s maiden name, Social Security number or bank details. Just remember to never provide private information to someone who calls you. Bonus tip: Tell a suspicious caller that you work for the federal government and that they are on a recorded line. Oftentimes, they will simply hang up rather than risk being tracked.

Check your credit report: Scan your credit report every few months. You are entitled to one free credit report each year from each of the three credit bureaus. Set up a reminder to pull one every four months so that you can check for fraudulent activity, like new accounts opened in your name. Do not get fooled by sites claiming to offer you credit reports for free—the only truly free credit report site is through annualcreditreport.com, which is authorized by federal law.

Call the IRS (yes, voluntarily): For all the flak they get, the IRS can be extraordinarily helpful. If you think that you may be a victim of tax fraud or identity theft, call the IRS and they can look up your account. You may have to sit on hold for a bit, but it is worth it.

Being Prepared Can Help Reduce the Risk of Identity Theft

There are a myriad of tools available to protect you from identity theft. The Internet is a great resource for verifying suspicious phone numbers (reverse lookup is a great tool), researching companies or advising on what to do if you are the victim of fraud. And if you, too, get a call from one of our deceased founding fathers, hopefully you feel more prepared to handle him.

Neela Hummel

Neela Hummel is a partner and financial advisor with Abacus Wealth Partners.

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