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Can’t Wait for Your Tax Refund? Neither Can Hackers

Tax fraud impacts thousands of taxpayers every year. We’ve compiled four quick tips to help protect you against tax fraud and other forms of identity theft.

Articles by The Security Team

By The Security Team
Betterment  |  Published: February 17, 2017

Thousands of taxpayers lose millions of dollars each year to fraudulent tax refunds.

One of the simplest ways to help avoid falling victim to tax fraud is to file your taxes as early as possible.

Your credit history is an important asset—monitor it to make sure nothing looks out of the ordinary, and keep an eye out for phishing scams.

At Betterment, your account security is our priority. But we also recognize that the importance of security expands beyond your Betterment account—like when you file your taxes.

The unfortunate truth of the matter is that tax fraud impacts thousands of taxpayers every year. Halfway through the 2016 tax season, there were already 42,148 tax returns with $227 million claimed in fraudulent tax refunds.1

What’s worse is that the victims of tax fraud often don’t find out about it until they try to file their taxes and have their submissions rejected by the IRS.

We’ve compiled four quick tips to help protect you against tax fraud and other forms of identity theft.

1. File your taxes before hackers do.

The easiest way to help avoid falling victim to this type of tax fraud is simply filing your taxes before hackers have a chance to do it for you. In other words, file as early as possible. And don’t forget, even if you’re not getting a refund, frauders can claim that you’re owed one and cause all sorts of IRS headaches for you later to clean up.

2. Periodically check your credit report.

Consumers are entitled to a free annual credit report from each of the credit reporting agencies Experian, TransUnion, and Equifax. Check your credit reports and make sure they are accurate.

3. Keep an eye out for phishing and other scams.

Hackers will typically utilize phishing tactics in order to obtain W-2s from employers or directly from individuals. Make sure the senders are legitimate, and carefully check links before clicking. If you are unsure, you should always reach out directly to the sender through a confirmed channel (e.g., phone, website) versus responding to the email.

4. Consider putting a freeze on your credit.

Consumers are allowed to put a freeze on their credit at each credit bureau. This may seem drastic, but it makes it significantly more difficult to open fraudulent lines of credit in your name. Please note that if you need to open a new line of credit (e.g., apply for a credit card, get a loan, etc.) you’ll need to unfreeze your credit with the bureau before you will be able to do so. There may be costs involved with placing a freeze on your credit. Check with the credit reporting agencies (Equifax, Experian, and TransUnion) for more information.

For more information on our security practices and ways to protect your account, you can visit: betterment.com/security/security-procedures

1 The report identifies tax season as Jan. 1 through mid-April. These numbers were reported as of March 5, 2016. https://www.treasury.gov/tigta/auditreports/2016reports/201640034fr.pdf

Betterment is not a tax advisor, nor should any information in this article be considered tax advice. Please consult a tax professional.

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