Why the Next Four Weeks are Critical to Filing Your Taxes

Death and Taxes- two things we can't avoid. I don't know about you but I really hate filing taxes. It is so much paperwork and time consuming, even when my paperwork is organized. I usually put it off until later, much, much later. What I have been reading lately about identity theft and stolen identity refund fraud is making me change my mind.

According to the Government Accountability office, stolen identity refund fraud netted scammers more than $24 billion dollars in 2013 and that number is rising every year. They do this by making up fake W-2/1099 forms and other information so that the IRS receives a false return that is direct deposited into their account, deposited on to debit cards or mailed to addresses where they can get them out of mailboxes. With 90% of refunds being deposited within 21 days of being e-filed, scammers get the jump by filing early.

The IRS begins accepting returns around the middle of January. However your employer is required to send you your W-2 forms by January 31 and others like brokerage firms have later deadlines. Some of mine have indicated statements would be mailed by February 15th. This creates a perfect time frame for scammers to come in and take over your tax return. Since filing electronically does not require the tax documents accompany the return, all a scammer needs is your name, birth date and social security number-which are available, according to AARP for as little as $25 or free from your mailbox. Find out more here.

If you haven't already signed up for electronic delivery of banking, brokerage and other documents, this might be a good time to do so. Retrieving them electronically usually means you get them faster and more securely. Most identity theft is still accomplished the old fashioned way-via paper statements either stolen out of mail boxes or found un-shredded in the trash. It is also a good time to get a locking mailbox. When statements are mailed, they are usually done in bulk, meaning they are sent out all at once to certain neighborhoods etc. all a scammer needs to do is follow the postman on statement delivery day and go through unsecured mailboxes.

If you still get your statements by mail, and haven't received them by mid-February, you should give the companies a call. If the document was mailed to you and you didn't receive it- assume it was stolen and consider an immediate credit freeze.

The IRS claims it stops most fraudulent claims even though billions of dollars in refunds are stolen each year. For many, the first sign that something is wrong is when their electronically filed return is rejected because someone else has already filed. The IRS claims they have new technology and new initiatives to combat this fraud. Be comforted by the fact that most people who have their refund stolen eventually get their money back, although it does cost time and a few headaches.

For more information check out the IRS Taxpayer Guide to Identity Theft here.

So what am I doing to prevent this from happening to me?

  1. I have switched all the tax documents I can to electronic delivery. Those that insist they be mailed to me, I have used the last statement of the year to input the information into my tax preparation software.
  2. I spend a few minutes every night, while going through the mail, to enter the information that came into the mail each day into my tax software. I also will retrieve the information for my taxes that doesn't come in the mail (like charitable receipts) one at a time and enter it in. This way it doesn't take a lot of time all at once.
  3. I am planning on filing by February 1. I should have all my information by then. If something changes after, I can always file an amended return (keeping in mind that I may have to give some of my refund back!)

Finally, I am going to check and possibly amend my W-4 withholding documents with my employer to prevent the government from using my money all year without paying me interest! I want it in my paycheck. After all- it's my money-I want to use it, not wait for it to be refunded to me.

How about you?