Tax identity theft: 5 ways to protect yourself from scammers during filing season

Tax season is stressful enough without having to worry about someone stealing your identity and pocketing your refund. But you need to be extra vigilant in the era of electronic tax filing: Tax fraud is on the rise, with the the IRS reporting a 400% increase in phishing and malware schemes in 2016.  

You probably already know that the IRS isn't going to send you an email or give you a call. But with scammers getting ever more sophisticated, you can never be to careful with your most private financial information. 

Here are five important steps you can take right now to protect yourself:

1. Keep your social security number secure.

Criminals only need your name, date of birth and social security number to create a fake W-2, file a fake return and get a refund from the IRS in less than a month, Forbes notes. One of the biggest ways fraudsters obtain social security numbers is through phishing, where the criminal sends an email appearing to be from your bank or credit card company asking for your social security number or passwords.

Only share your social security number in situations where it is absolutely necessary. You have to give it your employer and provide it when filing your taxes, but aside from that, you have a right to ask why it is needed and if you can provide alternate information instead. When in doubt, ask what will happen if you refuse to provide it, the Social Security Administration recommends, then decide if it is worth the risk.

Also, never carry your social security card or number around with you. Instead, keep it in a fireproof lock box at home. That way, even if you get robbed, or your house burns down, this essential form of identification will be safe.

2. Check your credit report often.

Getting your credit report is free, and you can get one from the three major credit reporting agencies — Equifax, Experian and TransUnion — through sites like Annual Credit Report. Be sure to look for any accounts you never opened or surprisingly high balances. These are all signs your identity may have been stolen.

Even though credit reports are free, only 12% of people surveyed by Experian in 2016 said they planned to check their credit report during the tax filing process. One reason some people hesitate is because they think checking their credit report will lower their score, Credit Karma notes. But while your score can drop a few points when a financial institution or lender requests your credit report, checking it yourself won't hurt one bit.

3. Take care when selecting a tax preparation service.

If you are using an online tax preparation program, first install the latest anti-malware software on your computer, then ensure you are using the latest version of the online tax software and use strong passwords, Consumer Reports suggests. Also, research any paid preparer or tax preparation software, as scammers will create fake websites and software downloads, Experian adds.

If a human handles your taxes, ask for their IRS paid preparer tax identification number before starting the process, Justin Lavelle, chief communications officer for the Been Verified online background check service, suggests. If the preparer promises that his or her services will result in a larger refund than anyone else, reconsider using that company or individual, Lavelle added.

4. Know how to spot fake IRS communication.

"The IRS will only notify you by mail," Ori Eisen, CEO of online security company Trusona, told Mic. "Don't respond to a phone call, text message or email saying the person is from the IRS, especially if they are asking for you to provide your social security number."

And while snail mail is the only way the IRS will reach out, at least initially, scrutinize the letter before you act. "Its easy to steal an IRS form from someone's mail and make a copy,"  Michael Bruemmer, Experian's consumer protection expert, told Mic. Instead of automatically calling the phone number listed on the letter, contact the IRS's main number and talk to a representative. If the letter is legit, they will have a record of it.

5. See if you can get an identity protection PIN from the IRS.

An IRS-issued personal identification number is a six-digit number taxpayers can use to help the IRS verify the taxpayer's identity and accept federal electronic or paper returns. Residents in Florida, Georgia and Washington, D.C., are automatically eligible to receive a PIN as part of an ongoing pilot program. Residents in other states can only get one if the IRS invites you to register for one. 

In March 2016, the IRS temporarily suspended the PIN program after identifying 800 fraudulent returns that used an IP PIN, however the program was quickly re-instated over the summer with a stronger authentication process. 

If you think you've been hit by fraud, the IRS says to submit an IRS identity theft affidavit. "You can also use it if your identity has ever been compromised or you're a victim of any other type of identity theft," Carrie Kerskie, identity theft expert told USA Today.  Also, file a complaint at the government's identity theft website and follow the steps for a recovery plan there. Also, if you haven't received your refund and simply wonder if its been delayed, check with the IRS. 

Sign up for The Payoff — your weekly crash course on how to live your best financial life. Additionally, for all your burning money questions, check out Mic's credit, savings, career, investing and health care hubs for more information — that pays off.