April 15 has come and gone but the risks of tax refund identity theft still loom large. As many financially successful families and their advisors await their tax refund, they might learn that perpetrators of identity fraud have beaten them to it. Identity thieves target millions of Americans each year, and filing fraudulent tax returns based on stolen identities has become a popular gambit.
In the first half of 2013, 1.6 million consumers were victims of identity theft resulting in tax refund fraud. As identity thieves become increasingly sophisticated, wealth advisors can help their clients be ever-vigilant about protecting their privacy and fully aware of the warning signs of tax refund identity fraud.
Financially successful individuals are lucrative targets and are especially vulnerable to identity theft because they often have prominent positions in their community. In the event such a breach does occur, the current IRS backlog of nearly 650,000 unsolved identity theft cases means that six months to a full year could pass for just one case to reach resolution. For wealthy families and their advisors, this means that preventive measures are especially important.
Advisors can help their clients avoid potentially significant financial loss by recommending several actions to manage their sensitive personal information and guard against identity fraud during tax season.
1) Heed the Warning Signs
Beware the warning signs of fraud. If your clients receive IRS notices that indicate more than one tax return was filed, that there was an outstanding balance for a year you did not file a tax return or that you received wages from an unknown employer at any time, take action immediately. Run a credit report check once a year, every year, to ensure that no red flags have been raised.
2) Protect Personal Information