New identity theft scam: Fake tax returns and stolen refunds


In the wake of tax season, The South Florida Sun Sentinel  reports that the number of people who have had identity thieves file false tax returns in their name and claim their refund for themselves has grown exponentially.

Here’s how this plays out: The crooks file returns showing low income and high deductions and then take an electronic refund, which usually arrives in about a week. When you go to legitimately file your return, it’s rejected by the IRS because somebody else already filed as you!

Once this starts, it can become a lengthy process to clean up the mess. Unfortunately, there’s no IRS-approved way to do anything to prevent the crime from taking place. And that’s a problem; the Sun Sentinel reports instances of this crime spiked from some 50,000 in 2006 to nearly 1 million last year.

But I never like to tell you about a problem without some kind of solution for you. So here’s my advice: Reduce the amount you have withheld during each pay period to eliminate any refund at tax time. When there’s no refund you’re waiting on, you can’t be hurt by the actions of some crook making off with your money.

As I’ve said before, whenever you get a refund, it means you’ve made an interest-free loan to the IRS during the year. That’s never a good idea. So you need to protect yourself, not make those loans to the IRS and thereby eliminate the difficult aftereffects of being subject to this particular type of identity theft that the IRS can’t seem to keep under control.

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