A hand with a black glove is reaching out to a social security card and driver's license to showcase the importance of knowing how to prevent financial fraud.

Navigating Tax Season: Effective Ways to Prevent Financial Fraud

Tax season is a busy time for everyone, but it’s also a prime time for identity thieves. The reason behind this is simple: access to sensitive personal information. When you file your taxes, you are essentially handing over the keys to your financial kingdom – your Social Security number, income details, and other personal information. This data can be a goldmine for fraudsters who can use it to file fraudulent tax returns, steal refunds, or even commit more extensive identity theft. That’s why it’s so important to understand the step you can take to prevent financial fraud. 

Understanding the Threat of Tax Time Fraud

As per various sources like the Federal Trade Commission and Internal Revenue Service, tax-related identity theft happens when someone uses your stolen Social Security number to file a tax return and fraudulently claim a refund. Often, victims are unaware of this until they file their taxes and find out a return has already been filed under their social security number. In fact, according to the U.S. Department of the Treasury, the Internal Revenue Service (IRS) marked over 1 million tax returns as potentially fraudulent due to identity theft during the 2023 tax season. This indicates that identity theft remains a significant and widespread issue for taxpayers.

Practical Tips to Prevent Financial Fraud and Tax Identity Theft

Now that we understand the threat, let’s delve into how we can prevent financial fraud and tax identity theft.

  1. File Early: One of the best ways to avoid being a victim of tax-related identity theft is by filing your return as early as possible. This leaves less time for fraudsters to file a fake return in your name.
  2. Secure Your Information: Be cautious about who you share your personal information with and always verify the legitimacy of the request. Whether it’s a phone call or an email, if you didn’t initiate the contact, don’t give out your information.
  3. Use Secure Internet Connection: If you’re e-filing your tax return, make sure you’re doing so on a secure (https) internet connection. Avoid using public Wi-Fi networks to send sensitive information.
  4. Monitor Your Accounts: Regularly check your financial accounts and billing statements for charges you don’t recognize. Early detection can help mitigate the damage done by identity theft.
  5. Protect Your Social Security Number: Don’t carry your Social Security card in your wallet and only give out your SSN when it’s legally required.
  6. Monitor Your Social Media Activity: Social media platforms can be a goldmine for fraudsters trying to access personal information. Be cautious about what you share online. Avoid posting sensitive details like your full name, address, phone number, and financial information. Also, it’s important to review your privacy settings regularly to ensure that only trusted individuals have access to your profile. Beware of suspicious friend requests or messages, as scammers may create fake profiles to gain your trust. Remember, a simple piece of information could be all a scammer needs to commit identity theft or financial fraud. Stay safe by staying vigilant on social media.
  7. Be Careful with Emails and Links: Be wary of any unsolicited emails, especially those that ask for personal information or prompt you to click on a link. This could be a phishing attempt designed to steal your personal data or install malware on your computer. Always verify the source before responding to such emails. Remember, the IRS will never initiate contact with taxpayers via email about a bill or tax refund.
  8. Shred Important Documents: Don’t just toss out documents that contain sensitive information. Shredding these papers can prevent them from falling into the wrong hands.
  9. Use Reputable Tax Preparers: If you’re hiring someone to do your taxes, do your research and ensure they have a good reputation. Scammers may pose as tax preparers to get access to your sensitive information. At Members 1st, we offer members exclusive access and savings on Tax Preparation. Visit Love My Credit Union rewards for more information.
  10. Secure Your Online Shopping Experience: As convenient as online shopping is, it can also expose you to potential financial fraud. Always ensure that the website you’re shopping from is secure and reputable. Look for “https://” at the beginning of the web address, which indicates a secure connection.

Preventing financial fraud and tax identity theft is a multi-faceted responsibility. It requires vigilance, awareness, and proactive measures from each one of us. At Members 1st of NJ Federal Credit Union, we take your financial security seriously. We’re here to support you every step of the way and provide resources and tools to help protect your hard-earned money.

It’s not just about safeguarding your finances; it’s about protecting your identity and your future. So, let’s work together to make this tax season a safe and secure one and prevent financial fraud. Not a member yet? Join today!