How to detect and fix Tax Fraud?

Tax Calculator (Credit: Pixabay)

Last Updated on February 13, 2023 by Okoro Daniel O.

What is tax fraud?

As per the Fedortax website, tax fraud can be defined as “more than just a mistake; It is a willful attempt to get out of tax obligations. The key to a tax fraud claim is that the person accused of the crime willfully or intentionally committed acts to avoid paying taxes”.

In simple words, tax fraud is equivalent to illegally acquiring something valuable from someone else through trickery. The definition stated above depicts how tax fraud is a willful attempt to get around tax obligations. 

The telltale signs of a Tax Fraud:

Tax fraud is one of the worst infringements a taxpayer can get inspected for when it comes down to IRS civil tax breaches. The penalties imposed for such breaches are much more serious than those imposed for regular violations. IRS keeps a backup of proof which, if it’s of concerning nature, can provoke them for raising the matter for criminal investigation. 

This section talks about all the red flags that you need to be careful about so you don’t fall victim to such frauds.

Finding your return files already filed – but not being able to recall when

One fine day, you might sit down to file your returns only to learn that they have already been filed and a cheque, too, has been issued against your information. Unable to comprehend how that has happened, you might accept it and blame it on your memory because how else can that happen, right? There are a hundred ways that could’ve happened, none of which have anything to do with you filing it and forgetting about it later. 

Receiving a tax form from an alien employer

Another obvious red flag is when you receive a Form W-2 (A Wage and Tax Statement, meant solely for employees), or a Form-1099 (exclusively for independent contractors) from an employer you never worked for. 

Receiving a tax refund – unexpectedly

Receiving a tax refund cheque in your mail unexpectedly is one of the most obvious signs of tax fraud. Such a scenario occurs when the refund cheque is sent to your residential address (mistakenly) by the crook instead of his own address. 

IRS wants to verify your identity or sends a verification for your unreported income

You are bound to be contacted by the IRS if they suspect shady activities being carried out against your information. You may be asked to validate the information like your name, your Social Security Number and other information that it deems fit to acquire. If you are presented with an IRS notice CP01E, claiming you as a victim for a theft that is identity-related, there are huge chances that you actually are.

A CP-2000 notice is just as concerning. 

According to the IRS’ Guide to Employment-Related Identity Theft, a CP-2000 notice requests you to present your unreported income/payments/credits. Such a notice is an obvious sign that you have fallen victim to cybercrime. 

Receiving unusual demands from your tax preparer

There might be times when your tax preparer repeatedly insists on getting your tax forms signed even before they are complete, or is unbothered by the fact that a W-2 or 1099 is sent to you by an unfamiliar company. Such situations depict that intentions are less than noble. It is not difficult for a tax preparer to get a hold of your refund if he has access to your signatories and Social Security Number.

Receiving a call from IRS for paying immediately 

Creating panic is a crook-favorite trick. They call to inform you to pay to the IRS immediately or be arrested within the hour. Elderly people are most likely to fall victim to such an act resulting in them losing their money. Please note that the IRS will never call anyone personally to ask for payment.

What to do about your tax ID theft?

It would be wise to act without any delay if you have fallen a victim to IRS identity theft.  The steps mentioned below are suggested by IRS themselves:

  • Respond immediately to the IRS Official Notices sent your way:

Be sure of the uprightness of the notice sent to you by the IRS and then respond accordingly. They usually have details about how to go about the process listed clearly. 

  • Make sure you have completed the IRS Identity Theft Affidavit:

In case your returns get rejected paired fillings under your Social Security Number, completing Form 1403 IRS Identity Theft Affidavit is recommended. All you have to do is print the form, fill it, and mail it to the IRS with your return to have them investigate the matter.

  • Make sure that the Tax ID Thefts are reported to the concerned entities:

The tax ID theft can be reported to the Federal Trade Commission and to the IRS. A report should also be filed to the credit bureaus. 

  • Always request a copy of your tax return:

If you have any reason to suspect identity theft, you can always ask for a copy of the fillings that are made in your name. 

How can Tax Identity Theft be prevented?

Always be mindful of securing your personal information, (more specifically, your Social Security Number). Mentioned below are steps that are going to guide you on how to do so:

  • Acquiring an IRS Identity Protection PIN:

An IP PIN can be signed up for with the IRS. It will provide extra protection to your Social Security Number at the time of your tax return.

  • Securing your personal information:

Like securing any online information, personal documentation like tax returns, Social Security Cards, etc. should be kept well-secured in anti-virus protected and backed-up files with strong passwords.

  • Beware of phishing scams:

People out there are in constant search of ways to get their hands on your personal information. It is important to know when you are being played at the hands of cybercrooks. Always stay on top of phishing scams, cybercrime trends as highlighted by authorities and in the news to take timely, preventive action. 

Final Verdict

Tax frauds are a serious problem and hundreds of people throughout the country fall victim to it every year. The only way around it is to be proactive rather than reactive. So educate yourself, beware of cyber crooks and take preventive measures to show them who’s boss if they try to scam you.

Notify of
Inline Feedbacks
View all comments

How Far Should You Go In Crypto Investment

Kizz Daniel

KIZZ DANIEL: Complete History, Biography, Family, State Of Origin, Net Worth, Age And Photos Of Oluwatobiloba Daniel Anidugbe (Kiss Daniel)