Tax season: Don’t let identity theft lead to stolen refund

The IRS is raising the alarm about identity theft-related scams this tax season.

"If they have enough information, all they need to do is go into a system and act like they're you," said Rodrick Benton, Assistant Special Agent in Charge of IRS Criminal Investigation’s Houston Field Office.

In February, a 34-year-old man from Kyle was sentenced for stealing more than $700,000 by using stolen information to obtain fraudulent tax refunds.

In March, an Austin federal grand jury returned an indictment charging a group of seven people for a similar crime. They allegedly claimed over $100 million in false tax refunds.

Benton says there are two main ways your information can be compromised, fraudulent tax preparers and malware.

Fraudulent tax preparers can also be referred to as "ghost preparers."

"Obtained naturally, through the course of business, they get personal identification information, Social Security numbers, DL addresses, and they may sell a list to buyers - fraudsters and individuals whose sole purpose is to steal your identities and use your identities to obtain illicit funds," said Benton.

Legitimate tax preparers must have a valid preparer tax identification number (PTIN), and they must sign all returns they create on the behalf of the customer.

One red flag is the promise of a higher refund for a price.

"For example, ‘I can get you $6,000, but if I give you $6,000, it's going to cost you that extra 200, $300,’" said Benton. "Any time you hear that it’s a trigger that something is going on."

Malware can also be used to access personal information stored in any computer.

"They attack the systems of return preparers or doctor's offices...any industry where they collect information," said Benton. "They might sell it to a third party, or they might be the fraudsters themselves." 

While this scheme can affect anyone, sometimes fraudsters target wealthier individuals who are paying estimated tax withholdings throughout the year.

"They can see this in the system, and they will file a return…they’ll say, ‘I didn't make as much money as I thought I would, I paid a quarter of a million dollars in withholdings, but I only made a quarter of a million dollars, therefore, I'm due a refund because I paid in all this money during the year,'" said Benton. "So that is a scheme that we see a lot now."

To prevent identity theft fraud this tax season, keep private information secure and research tax preparers ahead of time. 

An Identity Protection PIN (IP PIN) can also serve as another layer of protection. To obtain one, click here.