As if tax season wasn't already stressful enough, consumers increasingly have to contend with the possibility of fraud or identity theft involving their tax return.
Tax-return fraud is a mounting problem. In 2013, according to a Government Accountability Office report released last year, the Internal Revenue Service thwarted $24.2 billion in fraudulent refunds requested — but paid out $5.8 billion.
That's before thieves filed a wave of fake returns last year, prompting Intuit to temporarily halt the transmission of all state e-file returns filed through its TurboTax product. Before hackers got their hands on more Social Security numbers through breaches, including the government's Office of Personnel Management and health insurers Anthem and Premera — and before the IRS discovered a breach last spring in its own record-keeping application that exposed the records of an estimated 334,000 taxpayers.
Scammers have whipped consumers into more of a panic, renewing efforts to steal data and cash by masquerading as IRS officials. Some scams play off the risk of fraudulent returns. Others threaten audits, fines, arrests and all manner of other dire consequences to victims who don't wire cash immediately or click through a link to confirm their personal information.
You might see official-looking seals and language in an email that have been pulled from legit IRS communiqués, or hear background noise in a voice mail meant to resemble a call center, said J.J. Thompson, co-founder and chief executive of Rook Security, an IT security firm.
"This is people trying pretty hard to be successful at this," he said.
The Treasury Inspector General for Tax Administration last week went so far as to release a list of phone numbers known to be tied to tax scam calls.
Even if you're not a victim, safeguards put in place at the federal and state level to thwart tax fraud could delay your refund or otherwise snarl your return. Last year, 36.2 percent of returns the IRS flagged for potential identity theft were legitimate returns, according to a new report from the IRS National Taxpayer Advocate. It took 18 weeks, on average, for those taxpayers to receive their refunds.
Phishing calls and emails are the easiest tax fraud to avoid. Your best defense: Keep calm and think it through.
"People see something from the IRS and they start to freak out," said Melanie Lauridsen, senior technical manager for the American Institute of Certified Public Accountants. "Panic sets in instead of thinking through things rationally."
The IRS has said repeatedly that its first point of contact with you is going to be by mail. Not an email and not a phone call. Threatening a lawsuit or arrest isn't going to be a first, or even second or third, course of action, Lauridsen said.
Don't click on any links in emails or call back any numbers left for you in a voice mail, said Thompson. That can compromise your computer and may increase the phone calls from scammers. The best bet — if you think there's a legit threat or request that the government, your tax preparer, etc., needs you to address — would be reach out to that entity directly through an email or phone number you know is legitimate.
Heading off tax-return fraud is harder. Consumers who have previously been victims of tax-return fraud can obtain an IP PIN from the IRS that would make it more difficult for someone else to file using your information, said Lauridsen.
For the rest of us, the only option is to file as early as you can. Dragging your feet until the April 18 deadline gives a thief more time to file and snag a tax refund in your name, and it delays any action to unravel the problem. Get all your receipts and documents in order so that you're ready to file as soon as all your W2s, 1099s and other records arrive, Lauridsen said.
For the record: When April 16 is a Saturday, the District of Columbia observes Emancipation Day on April 15. This makes Monday, April 18, the regular due date for filing 2015 income-tax returns.
But some taxpayers can't — or shouldn't — move fast, she said. While the bulk of forms must be issued in early February, some have later deadlines or could be corrected closer to the filing deadline. S-Corporations have until March 15 to issue Schedule K-1 forms to shareholders, for example.
(Sure, you could prepare an amended tax return if you miss a 1099 or forget an important deduction in your rush to file. But although amending a return is easy, it could tie up your refund for months.)
With that wait for documents in mind, it's smart to have a good sense at the outset how many and what kind of forms you're expecting. Not receiving an expected form could be a red flag of old-fashioned mail theft, said Ken Chaplin, a senior vice president at TransUnion.
Receiving an extra, on the other hand, could indicate a fraudster opening new accounts using your name or other personal information. "Don't necessarily be dismissive of mail you think is sent to the wrong address," he said.
Tax season is also the one time of year that a lot of sensitive personal data is on the move, with employers and financial institutions sending tax documents to you, you transmitting them to your accountant or filing software and, ultimately, on to the IRS. Take care to safeguard that data every step of the way, Thompson said.
Use a secure file service to transmit documents electronically to your preparer, experts say.
And avoid sending anything in clear text. If you use a filing app that lets you submit a snapshot of your W-2, make sure to delete that photo from your phone, Chaplin said.