I’m a CPA: 5 Steps To Protect Yourself From Tax Fraud
When you imagine the work of a CPA, you probably think of someone furiously crunching numbers — not necessarily a ferocious guardian. Yet your regular accountant has the knowledge and skill to help you protect yourself from tax fraud.
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Many CPAs are passionate about protecting taxpayers from being taken advantage of. That’s why MoneyLion spoke with CPAs to identify the steps you should take to safeguard yourself and your family from tax fraud.
1. File Early
According to Brennan Kolar, founder of Atlas CPA Index, filing your taxes early is the single best thing you can do to prevent identity theft and tax fraud.
“Identity theft works because someone files a return in your name before you do and claims a fraudulent refund,” he said. “By the time you go to file your legitimate return, the IRS rejects it as a duplicate.”
Kolar says filing in late January or early February helps reduce the window for a fraudster to beat you to it.
2. Get an Identity Protection PIN
Kolar also recommends that taxpayers get an Identity Protection PIN, or IP PIN, from the IRS. It’s a simple step that can help keep your information secure from scammers. An IP PIN is a six-digit number assigned to your IRS account; without it, no one can file a federal tax return using your Social Security number.
“It’s essentially two-factor authentication for your taxes, so I highly recommend it in today’s age of technological scamming,” he said.
3. Know the Signs of Being Scammed
As a CPA, Kolar is aware of the major signs of tax fraud, and he believes the average taxpayer should be, too.
If someone contacts you by text, email or phone claiming to be a representative from the IRS — especially if they say you owe money and could be jailed if you don’t pay immediately — it’s almost certainly a scam. The IRS does not initiate contact with taxpayers by phone, text or email; it starts with official letters sent by mail.
“Also, never give your Social Security number to anyone over the phone unless you initiated the call,” he said.
He also advises checking your IRS transcript once a year to ensure no one has filed anything you didn’t authorize.
“This combination of preventive action and general oversight will help keep you safe from tax fraud,” he said.
4. Use Licensed Software To File Your Taxes
For Garth Sheriff, CPA, founder and chief learning officer of Sheriff Consulting, protecting your personally identifiable information (PII) is essential to avoiding fraud. He encourages taxpayers to use only licensed tax software with built-in safeguards for PII, such as well-known platforms like TurboTax, to prepare their returns.
Of course, the safest option is to work with a professional.
“If possible, I recommend using a licensed tax professional, even for a simple return, who has ethical, legal and regulatory standards to protect your PII,” he said.
5. Store Your Paperwork Securely
Taxes come with a plethora of paperwork, and you’ve got to store it somewhere. Sheriff advises against keeping documents in a random junk drawer. Instead, he suggests storing them in a secure place, preferably a locked filing cabinet or lockbox.
“Keep the documents for at least three years, if not six years. This is for purposes of an IRS audit down the road, for which you may need to provide support,” he said. “If you determine that the documents are outside the IRS audit period, you should either shred them using a trusted third party or purchase a shredder and do it yourself.”
If you’ve used electronic documents, he suggests storing them in a secure, password-protected cloud service such as Dropbox or OneDrive. Digital copies are acceptable as long as they are accurate, accessible and securely stored.
The Bottom Line
When you’re doing your taxes, protecting your identity is as important as managing your withholding. With advice from two CPAs, you can stay vigilant against scams and protect your personally identifiable information.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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