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Your Secret Weapon Against Tax Identity Theft

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Originally Posted On: https://www.tfnbtx.com/your-secret-weapon-against-tax-identity-theft/

 

You’re careful when it comes to your identity. Bank and credit card statements are always shredded, you cover your hand when entering a pin number and you never give personal information over the phone. But do you take extra precautions to protect your identity when you file your taxes?

Tax returns and identity theft may not seem like they go hand in hand, but tax fraud is among the top five forms of identity theft, according to the Insurance Information Institute. Luckily, you have a secret weapon to fight back against would-be thieves: a credit audit report.

Check out this video below to see how a credit report not only tells you about your credit score, but it can also warn you if your identity might have potentially been stolen. Better yet, take advantage of our Financial EDGE Academy resources to learn everything you need to know about identity protection and safeguarding your finances.

Now, let’s dive into tax identity theft and how to use credit reports as your ultimate theft protection weapon.

What Exactly is “Tax Identity Theft”?

Tax identity theft most often happens when someone uses your Social Security Number to file a tax return under your name. Other times, these thieves might steal your children’s or other close family members’ identities to claim additional tax credits.

By the time you file, the fraudster may have already gotten a refund, and you won’t know you’ve been victimized until you get word from the IRS. Another twist: A fraudster might use your tax ID to get work, leaving you to deal with the tax man when his or her earnings aren’t declared on your return.

And each year, fraudsters are developing new ways to use your tax info to enrich themselves. For example, they may contact you, posing as IRS agents or IRS-hired debt collectors, to reclaim the erroneous payment so that they can collect your credit card info and deposit the funds into their account. As with identity theft scams generally, it pays to be proactive in safeguarding personal data and running a credit audit report is one of the most effective ways to do that.

Your Secret Weapon: Your Credit Report

Even if you’re debt-free and don’t care what big banks and lenders think of you, you still need to check your credit report for errors or signs of fraud at least once a year.

But sifting through your report can be pretty confusing, especially if you don’t know how to read a credit report or what kind of red flags to look for. Here are the key details you should pay close attention to when reviewing your credit report.

Review your personal information

Your personal information identifies who you are, where you’ve lived, and where you work. Review these details to verify your name, birth date, current and previous addresses, Social Security number, and employment information. Reviewing personal information doesn’t impact your credit score, but these details help creditors verify your identity and protect you from fraud.

Verify your account details

Your credit cards, loans, and other accounts make up the bulk of your credit report information. Read through each account, checking for even the smallest errors. A few things to pay attention to:

  • Date opened
  • Account number
  • Payment history
  • Credit limits
  • Account status
  • Any past due amount
  • Accountholder status, for example, co-signed or authorized user accounts
  • Paid, canceled, or discharged accounts

Make Sure the Accounts Are All Yours

Accounts that don’t belong to you could be the result of a simple clerical error or identity fraud. Or sometimes, rogue collection agencies place accounts on consumer credit reports in an attempt to collect payment. Clerical errors and invalid collections can be resolved with a credit report dispute. With identity fraud, you’ll need to file an identity theft affidavit before sending a dispute to have these accounts permanently blocked from your credit report.

Review inquiries

Each time a company accesses your credit report to prescreen you or approve an application, a record of the inquiry is placed on your credit report. Inquiries you don’t recognize could be a sign of identity theft. (Note that they can also be soft inquiries.) You can dispute inquiries that you didn’t initiate to remove them from your credit report.

Outdated information

Most negative information can only be reported for seven years. The exception is Chapter 7 bankruptcy which can report for 10 years. Negative information will generally drop off your credit report automatically when it’s time, but make a note of any accounts still being reported after the time limit is up.

Handling Credit Report Errors

If you find mistakes on your credit report, you can write to the credit bureaus to have them corrected. In your letter, provide the account number associated with the error, explain the error, and a request for the mistake to be removed or updated. Include copies of any proof or supporting documents to help the investigation into your dispute. All three major credit repositories have links on their websites to assist with disputes.

Protect Your Identity This Year and Every Year

Being aware of tax fraud and identity theft—and preparing ahead by following the tips above—are key to keeping your personal and financial information protected. For more information and tips to keep your finances and online accounts secure, contact us.

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