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5 Tips to Prevent Tax Fraud


The Internal Revenue Service released tips to taxpayers on how to prevent tax fraud in honor of National Tax Security Awareness Week last week. Read on to learn the tips they've provided.

5 Tips to Prevent Tax Fraud

In honor of National Tax Security Awareness Week last week, the Internal Revenue Service released a series of reminders and tips to taxpayers and tax professionals. During the holiday shopping season, when we are likely using our credit cards more than usual, the IRS reminds us to be vigilant in protecting our personal information to prevent tax fraud and identity theft. Who better to advise us on security, tax returns, and fraud than the IRS? Without further ado, we would like to share with you the 5 professional tips we have picked up from the tax gurus themselves.

1. Keep Your Information Under Lock and Key

Online Security

While we’re happily purchasing holiday gifts for our loved ones, cyber criminals are on the hunt. The gift-giving holiday season can quickly turn into identity-stealing season for those seeking financial information. Nowadays, shopping online for presents is the simplest and most efficient way to buy but creates the easiest target for cyber thieves to steal personal information. Due to this, the IRS encourages using trusted, online retailers with which you are familiar and insists buyers avoid clicking on links from pop-up ads. Additionally, they recommend that web users be aware of Wi-Fi security and steer clear of suspicious hot spots.

Pro Tips

Pro Tips

Sites that include an “s” after “http” in the URL are secure. The lock icon in the URL bar will indicate a secure site as well. Never complete purchases on unprotected public Wi-Fi. Cyber thieves could be monitoring your transactions!

Password Protection

We have all experienced the annoying “expired password” message on our computers urging us to update an old password every few months. As tedious as it may be, password protection is one of the most vital pieces for both online security and the security of sensitive financial data. The IRS suggests using passwords that are strong, not easily recognizable phrases that include a combination of letters, numbers, and special characters. If your password is detected and used to login to personal accounts, having two-factor authentication in place is another security feature that can help protect your identity.

Whenever available, take advantage of this feature that requires an additional security code. The extra step to retrieve a security code, usually sent to a phone via text, can save you a lot in the long run. Having a different password for each site is also a simple preventative measure.

Pro Tips

Pro Tips

There are user-friendly and secure password manager apps that can house thousands of passwords easily.

2. Avoid Phishing Emails and Calls

The most common way for cybercriminals to steal bank account information, passwords, credit cards, or Social Security numbers, the IRS reports, is - believe it or not - asking for them.

That’s where phishing emails come in. A phishing email is a malicious email in which thieves pose as legitimate, trustworthy establishments or persons to solicit personal, tax, or financial information. Don’t fall victim to this scam! Emails from senders you don’t know, or even emails that are seemingly from those you do know can be compromising, and you should never offer personal information as no legitimate business will ask for sensitive information via email.

Another form of scammers asking for personal information is over the phone. Most typically, these callers will be posing as the IRS and claim that there is a debt owed or a lawsuit in progress. Again, the IRS urges to never give personal, credit, or tax information because this, too, is a scam. In fact, the IRS will never contact taxpayers with threat of lawsuit or arrest, so don’t be frightened into giving up valuable information - just hang up!

Pro Tips

Pro Tips

Never click on links or attachments from unknown or suspicious senders. You may be directed to a fake site or unintentionally download tracking malware.

3. Take Action If Breach Occurs

Hopefully, it never happens, but if sensitive information is stolen, there are a few telltale signs it has occurred. If you receive a notice from the IRS directly indicating that a tax return is rejected because one with your Social Security Number has already been filed or a notice that you have received wages from an employer you’ve never worked for, this most likely means a fraudulent tax return has been filed under your name.

If a breach does occur, first learn what information has been compromised and take action. Revisit your financial, email, and social accounts to see what information has been stolen. Change all passwords and implement two-factor authentication now if you have not already done so. Place a freeze on your credit or debit accounts and communicate credit fraud to the credit bureau.

4. Steer Clear of the Company-Wide W-2 Scam

It’s one thing if a security breach causing sensitive information to fall into the wrong hands happens under your own nose, but it’s another thing when it’s under your company’s nose. It can be extremely frustrating when tax fraud happens because personal information was accidentally given to scammers by your employer. So payroll administrators and tax practitioners, this tip is for you. Steer clear of the W-2 scam.

Similar to the phishing warning the IRS offered to individuals, they also warn businesses of the same form of suspicious communication. Hackers and cybercriminals may likewise pose as a colleague or executive requesting employee form W-2s by sending an email that appears legitimate.

Using company logos, colors, and email domains that closely resemble and only minutely deviate from authentic company email domains are all ways in which these thieves may convince you of their authenticity. Take action against this fraudulent activity by requiring more than one person review W-2 distribution or verbal confirmation prior to distribution.

Pro Tips

Pro Tips

The IRS requests that you forward any scam emails to and notify them of “W-2 Data Loss” to

5. Be Proactive Against Small Business Identity Theft

Like the W-2 scam that criminals are using to file fraudulent tax returns, they are also extracting sensitive information from these forms for purpose of employer-related identity theft. By stealing Social Security Numbers or Employer Identification Numbers, they can take advantage of employees by opening new lines of credit or acquiring credit cards. Again, if you receive notice that your legitimate tax return has been rejected due to duplicate EINs or SSNs, or you receive unexpected tax transcripts, your information has likely been compromised.

Due to this, the IRS has included “know your customer” procedures in its series of tips for businesses to provide additional information to prove the legitimacy of tax returns in 2018 and avoid tax fraud and identity theft.

Know Your Customer Procedure Includes:

  • The name and SSN of the executive authorized to sign the corporate tax returns
  • Payment history: when, how, and how much
  • Parent company information
  • Deduction information
  • Filing history

Tax Fraud Takeaways

Now that you have the IRS’s 5 tips to prevent tax fraud, we hope you can implement some of these preventative measures in both your personal life and work life to maintain security when it comes to financial transactions and communication. As we accelerate full speed into the gift-giving season of the holidays, remember to be careful when completing online transactions and err on the side of caution with suspicious links, sites, emails, and phone calls. Your cybersecurity is the cornerstone for peace of mind and defense against tax fraud, and with these pointers, you’ll stop cybercriminals in their tracks.

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