As we rush to file our tax returns, we’re reminded once again of the flurry of tax scams run by crooks who want to file phony returns in order to steal federal and state income tax refunds.
So don’t be surprised if you’re asked to confirm your own identity.
The Michigan Department of Treasury is asking select tax filers to take a short online quiz or submit extra paperwork in its effort to prevent tax refund fraud. Your state income tax refund won’t be issued until you respond. A phone option exists as an alternative to the online quiz. You’d first receive a letter from the state asking for more information to confirm your identity.
“The letter will have official Michigan Department of Treasury letterhead, which includes the Michigan Coat of Arms and the names of Gov. Gretchen Whitmer and State Treasurer Rachael Eubanks,” according to Ron Leix, a Treasury spokesperson.
Yes, it may take longer for some tax filers to get tax refund cash as part of the process. But not everyone is getting one of these letters, either.
The name of the game has been to stop tax refunds from going out the door to the fraudsters. We’re being asked to provide more proof that our tax returns are really from us. And we’re even being offered new ways to add another layer of protection to our Social Security numbers when we file our tax returns.
Tax identity theft is an ongoing crime as con artists steal personal data and then attempt to use your Social Security number to file a phony tax return and collect a refund.
“They’ve learned that they no longer have to put a gun to your ribs to make money,” said Luis D. Garcia, an Internal Revenue Service spokesperson at a media event in Southfield warning consumers about tax scams.
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Here’s a look at what you can do to protect yourself during tax season:
Use a special PIN to stop a crooks
The IRS has engineered an identity protection number to stop the filing of tax returns that attempt to use your Social Security number. So far, it’s been used by a limited number of taxpayers who were confirmed victims of identity theft, but the group is growing.
The IRS announced in February that it is expanding its voluntary Identity Protection PIN program to much wider group of taxpayers in 19 states and the District of Columbia.
At the start of the 2020 filing season, you may opt into the program if you filed a tax return last year from Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas, Washington and the District of Columbia.
“The IRS will expand this opt-in program nationwide over the next few years,” said Andy Philips, director of H&R Block’s Tax Institute.
If you’re eligible, he said, it’s an option worth considering.
The IRS notes that taxpayers must pass a rigorous identity verification process in order to obtain an IP PIN. Not everyone can pass. Only an online application process exists now. Taxpayers who want to use the IP PIN tool must apply for the number at IRS.gov/IPPIN.
Necessary verification items include having one financial account number linked to your name, such as a credit card, student loan, mortgage or auto loan.
The IRS has created a new Publication 5367 to explain the opt-in program.
The IP PIN is a six-digit number that can prevent a taxpayer’s Social Security number from being used to file a fraudulent federal income tax return.
The American Institute of CPAs has supported expanding the use of IP PINs to prevent identity theft and tax refund fraud.
Initially, the program was offered only to victims of identity theft. Later, a pilot program began in Washington, D.C.; Florida and Georgia. It was expanded last year to Michigan, Illinois, California, Delaware, Maryland, Nevada and Rhode Island. Those states reported the highest number of identity thefts to the Federal Trade Commission.
The IP PIN enables the IRS to verify taxpayers identities when they file returns.
Taxpayers are warned, though, that they must get a new IP PIN each year and they need to be on high alert for phishing attempts by cybercriminals and others to steal their IP PINs.
Take the steps to prove you are you
Sometimes, proving your own identity is essential to get a tax refund.
Many states, including Michigan and Ohio, put identity confirmation quizzes in place a few years ago as a way to put a stop to issuing refunds to the cybercriminals and others filing fake income tax returns.
Since 2016, the Michigan Treasury Department says the tougher security measures successfully protected more than 5,000 taxpayers who confirmed that their identity was stolen and later used to file a fraudulent return to request a state income tax refund. The state said its process prevented more than $19.5 million in state income tax refunds from being distributed to con artists.
“The state Treasury Department is continuously refining its processes to ensure we’re targeting cybercriminals and not real taxpayers,” said Leix with the state’s Treasury department.
“Taxpayers expect their refunds quickly. And we want to ensure we meet those expectations.”
The majority of Michigan taxpayers do not have to take any such quiz to receive their state income tax refund. Last year, 91% of refunds were reviewed and finalized within two weeks of receipt.
The remaining 9% required additional review and were processed within two weeks to six weeks.
One way to verify if you’re getting a real letter — not another scam — is to check the Michigan Treasury’s “Where’s my Refund?” on the Treasury website. The return should not show “completed,” as your refund would be delayed if you’re getting this type of correspondence to confirm your identity from the state. In Michigan, taxpayers also can call the state Treasury Department’s income tax information line at 517-636-4486 for questions about their state income tax return, including refunds.
During mid-February, the IRS typically begins sending out its own letters to verify identities of tax filers, too. The correspondence is called an IRS Letter 4883C.
The taxpayer needs to confirm whether he or she actually filed the tax return in question. The filer has up to 30 days to call.
You need the IRS letter, a copy of the prior year tax return (if one was filed), the current year’s tax return, and any supporting documents, such as W-2s, 1099s and applicable tax schedules.
Supply your ID before you file
It’s possible you may even need to supply identification before you file or complete a tax return.
“There’s a lot more preemptive data validation,” said Greg Rosica, tax partner at EY Private Client Services in New York.
Several states, including New York, for example now require tax professionals to include a client’s driver’s license or non-driver ID information on the tax return that they prepare for them. The state ID information helps validate identities. If the state can’t validate the client, the refund may be delayed.
In Michigan, tax professionals are asked to provide ID information for clients when able. If not provided, your refund won’t be delayed. Tax software products may also request ID information, too.
You’re not required to submit a driver’s license number to file a federal return.
Where to get help if you’re a victim
In February, the IRS launched an online resource called Identity Theft Central at irs.gov/identitytheft. The site offers information on how to report identity theft, as well as how to spot potential scams.
Philips, of H&R Block, said one sign that you’ve been a victim is when you can’t e-file your tax return because of a duplicate Social Security number. Other signs include getting an IRS notice that an online account has been created in your name, or receiving an email from an online tax preparation service that an online account has been created in your name, and you did not create that account.
The Federal Trade Commission also has a site called identitytheft.gov where you can report ID theft and get an action plan.
How you can avoid getting scammed
Don’t respond to random phone calls or phishing attempts. Understand that the crooks work overtime to come up with new ways to steal your address, birth date and Social Security number.
Never verify the last four digits of your Social Security number for someone who calls out of the blue or threatens arrest or makes other demands.
Don’t ignore clues during tax season that you might have been a victim of ID theft, as well.