Tax season has arrived — and unfortunately, that means scammers are on the prowl!
So what do you need to know in order to safeguard your identity and your wallet from thieves?
Here are three ways to protect yourself…
1. Do a credit freeze
People often turn to credit monitoring as a way to protect their financial life, but a credit freeze is what you really need.
Credit monitoring only puts fraud alerts on your credit files with the three main credit bureaus. These alerts are meant to raise a flag to potential creditors, alerting them to carefully verify an applicant’s identity before extending credit. But very often these alerts are ignored.
That’s why a credit freeze is superior to credit monitoring. A credit freeze allows you to seal your credit reports so no new applications for credit can be initiated in your name without your knowledge. (That’s often what happens in the aftermath of breaches, where a lot of personal info about you gets into the wrong hands.)
When you do a credit freeze with the three main credit bureaus, you get a PIN that only you know. This PIN can be used by you to temporarily ‘thaw’ your credit so that legitimate applications for credit and services can be processed. Without this PIN, a criminal would not be able to establish new credit in your name even if they are able to take over your identity.
Freezing your credit files has no impact whatsoever on your existing lines of credit, such as credit cards. You can continue to use them as you regularly would even when your credit is frozen.
A credit freeze will cost you from zero to $10 per bureau (every state is different), but I think it’s worth it. You MUST freeze your credit with all three bureaus.
Read more: Clark’s credit freeze and thaw guide
2. Beware of reload scams
This is a time when you need to beware of anyone calling or emailing you trying to impersonating the IRS. The cons may ask you to click a link or to verbally confirm additional personal information over the phone.
The scammers have been known to use phone spoofing to make their number come up as ‘IRS,’ and they already have your Social Security number — further lending them an air of legitimacy.
Here are some of thieves’ other tactics to watch out for:
- They use common names and fake IRS badge numbers.
- They send bogus IRS e-mails to support their scam.
- They call a second time claiming to be the police or Department of Motor Vehicles, and the caller ID again supports their claim.
Know this: The IRS will not contact you by phone asking for money. They only contact you by snail mail if they want to get in touch with you. So if you get one of these calls, hang up the phone!
3. Reduce your withholding at work
People will often come up to me around tax time and happily ask for advice on what to do with their giant refund. They treat it like it’s found money or some kind of windfall. But it’s not.
I’d prefer that you get no refund at all. If you are getting one, it means that you’ve made an interest-free loan to the government and your money has been working for them — not you — all year long.
Doesn’t Uncle Sam already get enough of your money? Why give him more?!
Many people try to justify their tax refunds by saying it’s a way to force themselves to save money. Nice try. While I agree that saving money is a valid concern, I believe there’s a better way to accomplish the goal.
Let’s say you typically get a refund of $1,200 every year. Try reducing your withholding at work by $100 a month and have your bank or credit union automatically transfer that $100 each month into a savings account. You never see it, so you never miss it. But the end result is that you’ll build your savings and earn interest all year long.
You can talk to your human resources department or a payroll specialist at work to reduce your withholding. I want you to be even-steven when it comes time to do your taxes — neither a borrower nor a lender be (to the government). That way the criminals won’t have any refund money to steal from you!