10 Signs of Tax Fraud: Is Someone Stealing Your Refund?

Tax fraud and identity theft are scourges on taxpayers’ wallets. According to the Federal Trade Commission, Americans lost nearly $6 million to IRS imposters in 2023.

Tax-related identity theft involves the unauthorized use of personal information, such as a Social Security number, to file a fraudulent tax return and claim a refund.

The signs are not always easy to spot, but here are 10 you should be on the lookout for so you can help protect your finances.

You probably know who you worked for over the last year, so if you see a bizarre W-2 or 1099, it's worth investigating.

If you receive forms for income you don't recognize, it could signal either identity theft or, here's hoping, a company error. If possible, contact the issuer for corrections, and it's never a bad idea to notify the IRS.

While this borders on the ironic and perhaps darkly expected, your unemployment payments get taxed.

But if you got a 1099-G and didn't receive unemployment benefits, someone may have used your identity to claim them, resulting in income reported to the IRS under your name. This might land in the "obvious things are obvious" category, but it can happen.

This shouldn’t come as much of a surprise, but you can’t e-file multiple times using the same Social Security number. The IRS will notice this and prevent a second return from being filed.

In fact, the agency lists it as among the first signs of data theft. So if you’re not allowed to e-file, it’s a sign someone else already did — in your name.

Much like a horror movie, the tax preparer down the street might not be who they claim to be.

If your tax preparer insists on signing your return early or directs IRS payments to them, it's suspicious. That could mean they plan to file a fraudulent return or bail with your money. 

Beware of ghost preparers who avoid signing or providing an IRS Preparer Tax Identification Number.

Scammers are constantly working to get your information and steal your money. Remember that the IRS will never email or text you about a tax refund.

If you get an email or a text from someone purporting to be from the IRS, whatever you do, don't click any of the links. It's just a way for some scammer to steal your identity or infect your device with malware.

Fun wine weekends aside, you probably know what you have and haven’t done. If the IRS notifies you that someone has created an online account, but you didn’t, that’s a giant red flag that your data has been accessed.

The best thing to do is to contact the IRS and law enforcement immediately.

The IRS is wise to all kinds of shenanigans that tax cheats try to employ. When it spots something fishy, the agency will send you a letter. 

That letter could be a Letter 5071C, Potential Identity Theft with Online Option, a Letter 4883C, Potential Identity Theft, or a Letter 5747C, Potential Identity Theft In Person Appointment.

The IRS asks taxpayers to follow those letters’ instructions, no pun intended, to the letter.

Owing the IRS more money than you were told, or worse, having a collection agency after you, is a nightmare scenario. The IRS also says it’s a sign you should file an identity theft affidavit.

That’s Form 14039. It’s available both in digital and paper formats.

As one might presume from the name, an Employer Identification Number (EIN) is used by the federal government for business purposes. If you have employees, you probably need one.

But if you don’t even have a business or you didn’t apply for an EIN and one is assigned to you, the IRS says that could be a sign of tax identity theft.

Similar to how the IRS doesn’t text or email, as mentioned before, it doesn’t make phone calls, either.

Charlatans may try to make it appear like their caller ID is legitimate, but they don’t believe it. They’re trying to scare you into picking up.

Don't let identity theft and tax fraud steal your peace of mind. By staying vigilant, you can protect yourself. File your taxes as usual and watch for red flags like rejected returns or unexpected W-2s.

Take control of your financial well-being by regularly monitoring your accounts and promptly reporting any suspicious activity to the FTC or IRS.

Remember, both the FTC and IRS offer convenient online fraud reporting options.