BBB Tip: How to avoid tax identity theft scams

Con artists use personally identifiable information of unsuspecting consumers to file phony tax returns and steal refunds.

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BBB's identity theft HQ

Consumers and businesses aren't the only ones preparing for tax season; so are the scammers.

One way to protect your information is to use the Identity Protection PIN issued by the IRS; if you filed previously and lost your PIN, the IRS can help.

In Canada, there are a variety of ways to minimize your risk when preparing for tax season. The Canadian Revenue Agency has these tips to protect yourself from identity theft.

Be aware of online identity theft with these tips.

How tax identity theft scams work:

Young black woman having troubles accounting taxes

Online filers that go through the IRS or CRA website usually expect a refund. Instead, a written notice arrives in the mail, stating that more than one tax return was filed using your information.

What happened? Scammers got hold of personal information, typically the account holder's Social Security or Social Insurance number, address, and birth date. They filed your return early and received your refund before you even got around to filing. Tax ID theft is a particularly sneaky con, because victims typically don’t realize they’ve been targeted until they actually file their taxes.

Scammers steal tax information in several ways, such as a phishing scam, a corrupt tax preparation service, or the information was exposed in a hack or data breach. Sometimes tax scammers file in the name of a deceased person or steal children’s identities to claim them as dependents.

How to avoid tax ID theft scams

File early.

The best way to avoid tax identity theft is to file your taxes as early as possible, before a scammer has the chance to use your information.

Watch out for red flags.

If a written notice from the IRS or CRA arrives in the mail about a duplicate return, respond promptly. Or, if an IRS or CRA notice arrives stating you received wages from somewhere you never worked, or receive other notices that don’t actually apply to you, contact the IRS or CRA office immediately. Another big red flag is if you receive a notice that “additional taxes are owed, the refund will be offset or a collection action is being taken against you for a year you did not file a tax return” (IRS). Contact the IRS or CRA if you have any suspicions that your identity has been stolen.

Secure your personal information digitally.

Use strong passwords for online accounts, enable two-factor authentication when available, and avoid storing sensitive tax documents on unsecured devices or cloud storage.

Avoid filing taxes on public wifi.

If you file taxes electronically, avoid using public Wi-Fi networks that might be vulnerable to hackers. Use a secure, private network or a virtual private network (VPN).

Protect your Social Security or Social Insurance Number.

Don’t give out your SSN, SIN, or other personally identifiable information unless there’s a good reason, and you’re sure who you’re giving it to.

Research your tax preparer.

Make sure your tax preparer is trustworthy before handing over your personal information.

Use your Identity Protection PIN (IP PIN) in the US.

In the United States, this six-digit number, which, in addition to your Social Security number, confirms your identity. Once you apply, you must provide the IP Pin each year when you file your federal tax returns. Visit IRS.gov for more information.

Shred sensitive documents.

Before discarding old tax forms or documents containing your personal information, shred them to prevent dumpster divers from accessing your data.

More information on tax identity theft scams:

More information is available about tax scams and how to avoid them: BBB Tax tips and resources.

Learn how to avoid tax scams in the U.S.

Learn how to avoid tax scams in Canada.

If you are the victim of tax identity theft in the U.S., contact the IRS at 1-800-908-4490 and consider filing a complaint with the Federal Trade Commission (FTC) at ftc.gov/complaint or by calling 1-877-FTC-HELP. The FTC also offers a personalized identity theft recovery plan at identitytheft.gov.

If you are the victim of tax identity theft in Canada, contact the Canada Revenue Agency.

If you’ve been targeted by this or another scam, help others avoid the same problem by making a BBB Scam Tracker report.