10 Tips to Avoid Financial Fraud Especially During Tax Time
From identity theft to investment scams, financial fraud can be a costly mistake. It is especially prevalent this time of year when tax fraud also seems to ramp up. People receive even more calls, emails, texts, or letters asking for sensitive information. In fact, fraud was up 70% in 2021 compared to 2020, with an estimated cost of $5.8 billion lost. To help ensure that your hard earned money is safe and secure, here are ten valuable tips on how to protect yourself from fraud.
1. Check your accounts.
Online banking has made it easier than ever to keep track of your accounts and guard against financial fraud. With real-time access to your bank statement, you can easily and quickly review account transactions to look for any suspicious activity. You can also set up automatic notifications if there is a sudden change in the balance or a large withdrawal from your account, allowing you to take action faster if needed. By taking advantage of the safety features offered, you can help protect yourself from fraudulent activity and have peace of mind knowing that your finances are secure.
2. Review your credit report.
Review your credit report regularly. Keeping track of who is accessing your credit information is one of the best ways to detect any suspicious activity. Did you know that checking your own credit will not lower your score? Each person is entitled by law to a free full credit report once every 12 months, including scores from the three credit bureaus, Experian, Equifax, and TransUnion. By checking regularly, you can keep track of any suspicious activity before it gets out of hand.
3. Protect your social security number.
Protecting your Social Security number is essential for keeping your finances secure. Never carry it in your wallet, write it on checks, or give it away unless absolutely necessary. Storing it in a safe place at home and memorizing the number instead of writing it down are good ways to ensure that no one else can access this important personal information. Additionally, any time you are asked for your Social Security number, make sure that the person asking is legitimate and that you understand why they need the information. Protecting your Social Security number is an important part of safeguarding yourself against fraud and financial theft.
4. Use secure passwords and two-factor authentication.
Although it’s tempting to use something obvious as your password, it’s important to use something that combines capital and lowercase letters and numbers and symbols. Changing passwords to your more sensitive accounts regularly is equally important to help keep them safe. Lastly, always opt for two-factor authentication when it’s offered. This will require two ways to verify that it’s you with either a combination of your password, a code sent to your phone or email, or even a fingerprint in some situations. This will add an extra layer of security to your accounts and make it more difficult for someone to access them without permission.
5. Do not give sensitive information away.
Exercise caution when responding to unsolicited emails, text messages, phone calls, or even letters that claim to be from banks, insurance companies, or other financial institutions. Some scams even pose as trusted businesses like Amazon or your utility providers. Technology even allows scammers’ phone numbers to come across with an IRS or Amazon caller ID, meaning extra precautions should be taken when asked for personal information.
Do not provide sensitive information such as account numbers or Social Security numbers unless you are absolutely certain the request is legitimate. It’s okay to view, but never click on the links that come through emails or texts. When in doubt, go to the company’s website and look for the main phone number to contact them directly. Many scams use scare tactics to make you think something will happen right away if bank information isn’t provided or an outstanding bill isn’t paid. Take the time to do your research to ensure you’re handing out your information to the right people. Lastly, most companies won’t ask for sensitive information over the phone.
6. Correctly dispose of personal information.
Shredding personal documents is a key step in preventing financial fraud. Documents such as old bills, bank statements, and tax returns contain sensitive information that can easily be stolen if not properly disposed of. By shredding these types of documents, you are taking an active role in protecting your personal information from being misused or accessed by criminals. Make sure to thoroughly shred all documents containing account numbers, Social Security numbers, or other private data before throwing them away to ensure that they don’t end up in the wrong hands. Shredding also helps protect against identity theft and provides peace of mind knowing that your private information is safe.
7. Be cautious when conducting online transactions.
When conducting online transactions, it is important to exercise caution and ensure that the companies you are ordering from are reputable. Be wary of clicking on suspicious links, as they can lead to malicious sites or downloads that can be used to access your private information. Additionally, when making purchases over the internet, try to only use a secure and private Wi-Fi connection if possible. Using unprotected public Wi-Fi can increase your risk of identity theft, as all your data will be unencrypted and vulnerable to anyone in the same network. Exercise caution when browsing online, as this is one of the most effective ways of protecting yourself from financial fraud.
8. If it sounds too good to be true, it probably is.
Investing can be a great way to build wealth, but unfortunately, it can also be a breeding ground for scammers. If you come across an opportunity that is offering returns that seem too high or sound too good to be true, likely, they are not legitimate. Before investing any of your hard-earned money into investments, always do your research and make sure the offer is legitimate. Don’t get caught up in claims of get-rich-quick schemes as they are often scams that will leave you out of pocket and could end up costing you more than just your initial investments. Keep in mind that although there are risks associated with investing, doing thorough research on any investment opportunities before diving in can help protect yourself from falling victim to investment scams.
9. File taxes early.
Filing your taxes early can help protect you against fraudulent tax returns, as filing sooner ensures that the IRS has processed your return before it gets to scammers. Additionally, doing your taxes earlier gives you more time to make corrections if necessary and reduces the risk of errors on your return due to rushing at the last minute. By filing your taxes early, you can ensure that no one else is claiming what rightfully belongs to you and give yourself peace of mind knowing all necessary paperwork is taken care of in a timely manner. Ultimately, filing earlier rather than later will help reduce stress and protect you from becoming a victim of fraud.
10. Lock down your social media.
Social media has become an integral part of daily life for many individuals, but it also poses a risk to personal data and financial security. Criminals can use social media to learn personal information, such as your birthday, full name, address, or other identifying details that can be used to access financial accounts. Maintaining a level of privacy with your personal information on social media platforms is important since attackers often search public profiles to build a complete profile of their victims, including possible security question answers such as pets, mother’s maiden name, etc. Using two-factor authentication wherever possible and avoiding posting personal details such as addresses or phone numbers, you can help protect yourself from malicious actors accessing your finances through social media.
It pays off to stay vigilant when it comes to protecting yourself from financial fraud — practicing due diligence now could save you from significant losses later on. By taking proactive measures like reviewing your credit report regularly, being careful when entering private data online, and researching businesses before engaging with them financially, you can rest assured that your money will remain safe and sound!
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