Insights & Analyses

Identity theft again among IRS’s ‘Dirty Dozen’ tax scams for 2017

February 3, 2017

The U.S. Internal Revenue Service issued an alert warning on Friday, reminding both taxpayers and preparers to beware of identity theft, with a list of handy security reminders that could help prevent you from becoming a victim.

Every year, the IRS puts out a list of the “Dirty Dozen” most common scams that occur during tax season. And without fail, every year identity theft makes the list.

The IRS said this year that although progress has been made to cut down on identity theft, it remains an ongoing concern and one of the top issues seen by the service at tax time.

In 2016 the number of taxpayers that reported stolen identities on federal tax returns fell by more than 50 percent. But there were still more than a quarter of a million people affected, meaning there is work to be done.

As a result, the IRS is offering taxpayers and tax professionals three key tips:

  • Always use software with a firewall and antivirus protections. Make sure security software is turned on and updated, encrypt sensitive files, and use strong passwords.
  • Learn to recognize and avoid phishing emails, threatening phone calls, and texts from con artists posing as legitimate institutions. Don’t trust calls, emails or otherwise from unknown or suspicious sources.
  • Protect your personal data. Don’t carry your Social Security card with you, and keep your tax records secure. The IRS recommends that citizens treat their personal information like cash: Don’t leave it lying around.

Other concerns on this year’s IRS “Dirty Dozen” are phone scams and phishing schemes. While phone scams are on the decline, phishing schemes with bogus emails are on the rise, and routinely trick taxpayers into sharing personal information.

As such, identity theft remains a primary concern for the IRS, which began instituting a crackdown this year via the Protecting Americans from Tax Hikes Act. That law mandates that the IRS hold on to federal refunds claiming an Earned Income Tax Credit or Additional Child Tax Credit until Feb. 25, in an effort to reduce tax fraud via identity theft.

While the end result is to avoid strife and save money, the IRS has warned taxpayers that their fiscal 2016 returns will be delayed as a result of the new security measures. The first EITC and ACTC affected funds will see their returns arriving in bank accounts the week of Feb. 27. It’s estimated that the delays will affect 15 million households.

While tax-related identity fraud may be on the decline, overall it saw an increase in 2016, according to recently released data from Javelin Strategy & Research. Their findings suggest identity fraud grew by 16 percent in America in 2016, reaching the highest levels seen by the firm since it began tracking such fraud in 2013. Last year, an estimated 15.4 million Americans fell victim to identity fraud.