How to protect yourself from tax identity theft this season

As the start of tax season approaches, experts are warning filers about tax-related identity theft, an issue that often halts returns and delays refunds.

Tax identity theft happens when criminals use your personal information to file a return in your name and claim your refund — and “it continues to be a huge problem,” said Eva Velasquez, president and CEO of the Identity Theft Resource Center.

The IRS’ Identity Theft Victim Assistance program had 294,138 individual case receipts during fiscal 2023, up from 92,631 in 2019, according to the National Taxpayer Advocate’s annual report to Congress released last week. 

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Tax-related identity theft has diminished since the early days of electronic filing. But “the challenge is it takes so long to resolve,” Velasquez said.

Indeed, victims are waiting an average of almost 19 months for the IRS to process their returns and issue refunds, National Taxpayer Advocate Erin Collins wrote in the organization’s report to Congress. She called the lengthy waits “unconscionable.”

There are signs of tax identity theft listed on the IRS website, including a letter from the agency about a “suspicious tax return,” the inability to e-file, tax transcripts by mail you didn’t request and more.

There are also two key steps taxpayers can take to protect themselves.

One of the best ways to avoid tax-related identity theft this season is by filing your return early, according to Mark Steber, chief tax information officer at Jackson Hewitt.

“There’s just too much downside risk in allowing the scammers and the stealers to come in and get in front of you by filing a faster return,” he said.

Of course, it’s important to wait for the necessary tax forms to file a complete and accurate return. With missing information, the IRS may flag your filing, which could cause delays.

As a year-round precaution, the IRS recommends protecting your data with strong passwords, multi-factor authentication, encryption programs and software updates.

If you’re looking for added protection, experts suggest getting an identity protection PIN, or IP PIN, from the IRS.

This six-digit number blocks others from using your Social Security number or individual taxpayer identification number to file a tax return. Once you enroll, the agency generates a new IP PIN for you each year.

Previously, IP PINs were only for identity theft victims. “Now, they’ve opened it to everyone,” Steber said. “I highly recommend it.”

However, he doesn’t recommend “last-minute adjustments” by trying to get an IP pin before filing your 2023 return. “If you file [your return] now, you do a lot more to protect your data and secure your personal information” than trying to get an IP pin in January, Steber added.