icon-fraud-theft.pngFraudsters who use stolen personally identifiable information can perpetrate a wide variety of fraudulent financial schemes, such as hacking online accounts, submitting phony insurance claims, and applying for loans and credit cards to pad their bank accounts. Increasingly, though, identity theft tax refund fraud is becoming a favorite money-making scheme for criminals. The Logix Fraud Risk Management team has seen an increase in this type of activity. With tax season upon us you should be prepared to ensure you don’t become a victim.

Ways to Protect Yourself

Although identity theft is difficult to completely guard against, there are some steps you can take to make it challenging for fraudsters to file a fraudulent tax return, including:
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  • Regularly check your credit report.
  • Never use public Wi-Fi or a non-password-protected network to file electronically.
  • File taxes as early as possible during tax season because criminals try to file fraudulent returns before the actual filer (once the IRS receives a return with an SSN, the agency will reject any duplicate filings and immediately notify you).
  • If filing taxes is not required, consider doing so anyway to prevent a criminal from submitting a false return in your name, and to be alerted if someone has already filed in your name.

How the Scam Works

Believe it or not, this fraud scheme is fairly easy to execute. Citizens usually receive a W2 tax form from their employers by the end of January each year. For the most part, taxpayers then file returns by the tax deadline date, which is Monday, April 18th in 2016. During that window, fraudsters are able to steal individuals’ personal information, usually Social Security numbers, file fake returns as the victims and collect the refund checks. Because the IRS attempts to issue refunds within three weeks of receiving submitted tax returns, the scam happens quickly and painlessly for the fraudsters.

Employers have until March to send their formal W2s to the Social Security Administration, which then eventually passes the documentation on to the IRS. The agency does not begin the process of verifying tax returns against employers’ W2s until July, which only increases the fraudsters’ chances of getting away with the crime. The GAO has reported that it can take more than a year for the IRS to complete the necessary confirmations and discover the fraud.

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Meet the blogger

Matt Overin

Matt Overin

Matt has over 25 years in the financial services industry. He has held jobs from Teller to New Accounts, Branch Manager and Regional Manager. Most recently Matt joined Logix in 2013 in the Fraud Risk Management department. Matt writes a column for the Logix employee newsletter called Vegan Recipes From the Non-Vegan. He enjoys spending his free time cooking for his family and friends.