Be on the lookout for unemployment fraud and other scams this tax season

By Allstate Identity Protection

Identity theft is an issue every year during tax filing season, but with the rise in unemployment benefits related to the coronavirus stimulus package, unemployment fraud, tax fraud, and tax-related identity theft numbers have surged. While there’s no way to prevent identity theft, here are some best practices to help reduce your risk. If you become a victim, we’ll do the heavy lifting.

COVID-19 has affected nearly every part of our lives and taxes are no exception. 

Last year, millions of Americans received enhanced unemployment benefits as part of the coronavirus stimulus package. Sadly, though, thousands of relief payments went to thieves posing as people who may not yet realize their identities have been stolen. 

Unemployment checks are considered income, and they are subject to taxes. It’s possible that many unsuspecting victims will discover identity theft when the government sends them a 1099-G tax form for benefits they never received.

The full scope of the fallout remains to be seen, but staggering sums have been reported stolen already. Almost as soon as lawmakers passed a stimulus bill, fraudsters began to take advantage, using stolen credentials to apply for unemployment benefits through state’s websites. California alone has reported more than $11 billion in fraudulent claims. The U.S. Department of Labor anticipates that unemployment fraud could total as much as $26 billion for the year. 

Even before the health crisis, scams often surfaced during filing season, with tax-related identity theft affecting thousands of people annually. Luckily, there are steps you can take to protect yourself from some types of tax fraud. And if you’re an Allstate Identity Protection member, you’ll never have to face any form of identity theft alone.

How to reduce your risk of tax-related identity theft

Tax-related identity theft happens when a thief uses your personal information to file a fraudulent tax return, pocketing the refund. 

If you’re the victim, you may not discover the issue until you are unable to submit your tax return because someone else has already filed in your name. 

While nothing can provide complete protection against identity theft, these best practices may reduce your risk: 

  • File your return as early as possible. This year, tax season kicks off on February 12. Once your legitimate return is processed, it’s harder for a thief to file in your name. 
  • Maintain good privacy habits. The IRS recommends all taxpayers take precautions such as using security software, encrypting sensitive information, creating strong passwords, and using multi-factor authentication whenever possible.
  • Be particularly careful about sharing your Social Security number, in the real world and online. 
  • Avoid the phishing hook. Remember the IRS does not use email, text, or social media to contact taxpayers — but pandemic-themed scams continue to proliferate. You can check the agency’s website to learn more about some of the most common COVID schemes. Don’t open messages from unknown senders, and be aware of the characteristics of phishing, such as frequent typos, blurry photos, and suspicious links. (Hover your mouse over an embedded link to see its true destination.)
  • Check out the IRS’s tips for vetting your preparer. Look for one with a Preparer Tax Identification Number (PTIN) and professional credentials, such as a certified public accountant (CPA) license.

What’s an Identity Protection PIN?

An Identity Protection PIN, or IP PIN, can add an extra layer of security to the tax-filing process. The PIN is a six-digit code issued by the IRS to prevent someone else from using your Social Security number to file a tax return. 

In the past, the IRS primarily issued IP PINs to people who filed an identity theft affidavit, or to those who experienced tax refund fraud before. 

But as of January 2021, any taxpayer can request one using the agency’s Get an IP PIN tool. 

Essentially, the PIN functions as another factor of identification. Once the IRS assigns one to you, you’ll need your PIN and your Social Security number to file, making it much harder for a scammer to make a claim in your name.

Visit the IRS website for more information about opting in to the IP PIN program.   

If there’s an issue with your identity, we’ll do the heavy lifting

These preventative measures help dial down your risk. But unfortunately, there’s just no guarantee against identity theft. 

If you’re a member and you discover an issue with your identity during tax season  — or any other time — we’ll be with you from start to finish. 

Our dedicated remediation specialists can lighten the load of unemployment fraud and tax-refund identity theft in tangible ways. In some cases, we can take on limited power of attorney to file paperwork and make official requests on a members’ behalf. 

Taxes may be one of life’s certainties, but tracking your identity can be filled with unknowns. That’s why Allstate Identity Protection provides everything you need to gain peace of mind.