Stolen identities, tax fraud, and hacking sound like plot points in the latest Hollywood thriller, but unfortunately they are the reality for millions of Americans each year.
Tax-related identity theft is a growing issue that has the potential to wreak havoc on your ability to grow and retain wealth over the course of your life. It happens when scammers use your personal information—such as your Social Security number—to file fraudulent tax returns and claim refunds in your name.
Far from existing only in movies, this type of fraud is happening more often than many think. In fact, millions of dollars in refund checks were stolen this year.
At Griffin Black, we believe in taking a proactive and comprehensive approach to financial wellness, and part of that is helping you stay informed and protected against threats like identity theft. With tax season coming around the corner, here’s what you need to know—and the steps you can take today to protect yourself and your family.
The Growing Threat of Tax Fraud
The IRS has issued warnings about the rise in tax-related identity theft, with scammers becoming more sophisticated in their methods. In 2024, nearly 10 million Americans chose to receive their tax refunds via check. As a result, thieves are targeting those tax refund checks, costing taxpayers millions of dollars. And with the increasing use of artificial intelligence in scams, fraudsters are now capable of creating highly convincing phishing emails and fake IRS correspondence designed to trick even the most vigilant among us.
The risk is compounded by data breaches, which have exposed millions of taxpayers’ Social Security numbers on the Dark Web. Notably, financial services are often hit hardest by cybersecurity events, with one such event exposing almost 3 billion records. Once a criminal has your personal information, they can file a tax return in your name, often before you’ve even had a chance to file your own.
The Real Cost of Identity Theft
Beyond the frustration of dealing with the IRS to resolve a fraudulent tax return, identity theft can create a domino effect on your financial life. It can delay a legitimate tax refund, cause issues with your credit, and leave you vulnerable to additional scams that target more of your wealth than just what you were due for with a tax refund. The emotional toll can be just as significant, leading to stress, anxiety, and hours of lost time as you work to reclaim your financial identity.
Practical Ways to Protect Yourself from Tax Fraud
The good news is that there are practical steps you can take to reduce your risk of becoming a victim of tax-related identity theft. Here are some key actions to consider:
Secure Your Personal Information
It sounds simple, but it’s worth repeating: safeguard your Social Security number and other sensitive documents. Store them in a secure location, and never share them via email or over the phone unless you’re absolutely certain of the recipient’s legitimacy. (Our team at Griffin Black will only ask you to share such critical information with us via our secure client portal.) Shred documents you no longer need, and be cautious about sharing personal details on social media websites like Facebook and Instagram, which scammers can use to piece together your identity.
Sign Up for an IRS Identity Protection PIN
The IRS offers an Identity Protection PIN (IP PIN) program, which adds an extra layer of security to your tax filings. This six-digit code is known only to you and the IRS, must be included on your return, and is valid for one year only. These types of multi-step authentication methods can significantly reduce the risk of someone filing a fraudulent return in your name.
File Early and Digitally
One of the simplest ways to protect yourself against tax return fraud is to file your return as early as possible. After all, scammers can’t file a fraudulent return if you’ve already filed yours. Furthermore, choose a digital filing option and select to receive your refund via direct deposit to your bank account so no paper checks can be intercepted while traveling in the mail.
Be Wary of Phishing Scams
Scammers often pose as the IRS in emails, phone calls, or text messages to steal your personal information. Remember, the IRS will never initiate contact with you via email or text—only through mailed letters. If you receive a suspicious message, don’t click on any links or provide personal details. Instead, report the phishing attempt to the IRS.
Monitor Your Credit and Financial Accounts
Regularly check your credit report and financial statements for any signs of unusual activity. Many financial institutions offer free fraud alerts, which can notify you of any suspicious transactions. Catching an issue early can make a drastic difference in limiting the impact and reach of a stolen identity.
Consider Professional Tax Assistance
If you’re concerned about identity theft or just want peace of mind, working with a trusted tax professional can help ensure your filings are accurate and secure. They can also guide you through additional protective measures tailored to your situation. While Griffin Black does not provide tax advice, we do work with a network of trusted CPAs and are glad to provide referrals to these professionals.
Taking the Next Step
Tax-related identity theft is a serious issue, but it’s one that you can defend against with the right strategies. Taking these steps is about more than simply preventing financial loss; it’s about protecting your peace of mind too. By being proactive, you can reduce your risk as you head into tax season.
And remember, you’re not alone in this—at Griffin Black, we help our clients navigate these kinds of challenges and provide the tools and knowledge needed to help you build a purposeful financial future.
Let your Advisor know if you have questions, concerns, or just want to talk.
