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February 27, 2012
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March 27, 2012

How Safe is Your Tax Refund from Identity Theft?

Imagine filing your taxes, clicking the send button on your electronic tax return — and  then getting a rejection note from the IRS informing you that your tax return has already been filed. Odds are somebody did indeed file your taxes on your behalf…but not because they’re feeling generous.

No, chances are a thief has stolen your identity and filed your tax return in order to steal your refund check. But it gets worse, now you have to deal with the IRS (who doesn’t have the greatest reputation for customer service) and explain the situation.

This very scenario happened to Florida resident, Debra Tyler. Tyler contacted the IRS and did what they recommended, filled out the paperwork and filed a police report.

Six months after Tyler submitted the necessary paperwork and police report, the IRS sent her a replacement refund check.

But she never got it. Her replacement check was also stolen!

And on top of all this Tyler received a bill from the IRS for $1,025, requiring her to pay the interest on the money from the first check the thief stole.

“Incompetence across the board,” said Tyler.

 How Common Is Tax Related ID Theft?

 So how common is this? Well for the 12th year in a row, identity theft topped the list of consumer complaints received by the FTC in 2011, with nearly 280,000 complaints, according to a recent FTC report. And the number of tax related cases continues to grow with 24% of identity theft complaints being tied to tax or wage-related fraud (up from about 15% in 2010, according to the FTC).

Identity theft is one of the biggest crimes happening today.  And now the thieves have figured out how to steal money, not only from individuals, but also from the government. And the unfortunate part is that the IRS can take all the time they feel is needed to investigate claims like this.

 7 Ways to Minimize Identity Theft

 So what can you do to protect yourself? Well here are eight practical things you can do to protect yourself from becoming a victim.

 1. Protect your Social Security number

Keep a careful watch over your Social Security number. Don’t carry it around in your wallet or glove box. And if someone asks for your Social Security number, ask:

What will happen if I don’t give you my Social Security number?

How will it be used?

What safety measures do you have in place to help protect my SSN from being stolen?

 2. Treat your trash and mail carefully

Get in the habit of always shredding your sensitive information (as well as credit offers you get in the mail). You may also want to opt out of receiving prescreened offers of credit in the mail by calling: 1-888-5-OPT-OUT (1-888-567-8688). Note: You’ll be asked to provide your SSN which the consumer reporting companies need to match you with your file.

Send mail that contain sensitive information at the post office or a post office collection box, rather than in an unsecured mailbox. Check your mail often. If you’re going away on vacation be sure to contact the USPS at 1-800-275-8777 or visit to request a vacation hold until you return.

 3. Be careful about giving out your personal information online

When you’re online and a website asks for your personal information make sure you know and trust the business. Many times web forms only require you to input your name and email address while the rest of the information (i.e. address, DOB, etc.) is optional.

If you don’t know or trust the business then don’t enter your information (and especially don’t enter your Social Security number).

 4. Use difficult passwords

Avoid using easy passwords like your mother’s maiden name, DOB, the last four digits of your SSN, your phone number, a series of consecutive numbers, or a single word that would appear in a dictionary. If you want to create strong passwords it’s best to use a combination of letters, numbers, and special characters.

 5. Protect your purse and wallet

If you run into the store don’t leave your wallet or purse sitting out in the open. And when you get home make a habit of bringing your wallet and purse inside with you. It’s also a good idea to leave your Social Security card and passport in a secure place at home (i.e. fire proof safe).

 6. Consider placing a freeze on your credit

Many states allow consumers to “freeze” their credit. If you place a freeze on your credit, potential creditors and other third parties will not be able to gain access to your credit report unless you temporarily lift the freeze.  The reason for doing this is to prevent an identity thief from opening a new account in your name. A credit freeze does not affect your credit score – nor does it keep you from getting your free annual credit report.

Credit freeze laws are regulated on a state level. Some states allow anyone to freeze their credit, while in other states, only victims of identity theft are allowed. The cost of placing and lifting a credit freeze also varies. Some states make credit freezes free for identity theft victims, while other consumers pay a small fee. If you want to freeze your credit, it would mean placing the freeze with each of the three credit reporting agencies.

 7. Consider identity theft insurance

While identity theft insurance won’t stop identity thieves, it can help minimize losses if an identity theft happens to occur. As with any product or service be sure you understand what you’re purchasing.

One thing most people don’t realize until after the fact is that one of the major costs of identity theft is the time it takes to clear your name. You should also know that many companies and law enforcement officials will only deal with you (not a representative from the insurance company).

So, even if your policy provides you a personal identity theft counselor, that counselor can often only guide you, as opposed to doing all the work to clear your name.

 Minimize your chances of becoming a victim

If you practice these seven tips you will be taking a proactive step to help minimize your chances of becoming a victim of identity theft. The most important thing to remember is that your personal information is yours and you are free to decide if you want to give it out or not.


Picture by Don Hankins from Flickr