Nearly half of all Americans (around 143 million) are scrambling to keep their credit safe with fraud alerts and credit freezes after a security breach at Equifax (NYSE:EFX) exposed their personal data to potential hackers earlier this month. Now many experts warn that fraudsters may try to capitalize on the hack during tax season.
"Tax return scams have always been a problem and now more people are at risk due to the Equifax data breach,” Michael Lai, CEO and founder of Sitejabber, a website-based platform that protects consumers from scams, tells FOX Business.
Lai says it’s imperative for Equifax victims to file their tax returns as quickly as possible this year.
"Once your return is filed, nobody else can file a second return without raising some red flags, so the scammers will simply move on to the next victim,” Lai adds.
Jay Shah, Personal Capital CEO, tells FOX Business that on a federal level, if you suspect any tax fraud – or if you just want to be extra careful this year – you can call the IRS and inquire what tax filings have been made in your name.
“Also, be sure to check your mail. If someone tries to change your personal information online, the IRS, as a matter of protocol, will send you a letter and alert you of this change,” Shah says.
Additionally, Shah encourages people to look into local resources that their home state may offer. For example, California has an online portal available where taxpayers can create a secure login to view their tax filings and refund information.
Aaron Frank, CEO of Final, a credit card startup company, tells FOX Business that if people want to avoid a fake tax return filed in their name, he recommends getting a PIN from the IRS before submitting a return as a second layer of protection.
Here are a few other tips to follow to keep your tax return safe this year, according to Lai: 1) Change withholdings so that less taxes are taken out of your paycheck to minimize the refund you are owed at the end of the year. In general, if you can swing it, this can also be beneficial by allowing you to invest that money before paying it back to the government.
2) Use the IRS website to get a PIN that is required before submitting a return (only available in some states or certain situations) or to set up alerts so you can see when your return is filed. While this won't necessarily prevent fraud, it can expedite the tax refund process so you don't have to wait so long to receive what you are entitled to. Therefore, you may find out more quickly if you’ve been scammed or not.
3) Tax refund scams originate from stolen Social Security numbers, so beware of any site that asks for too much personal information, any government-looking site that isn't actually associated with the U.S. Government, or any phishing site in general.