With the 2020 tax season well underway, here are some ways to avoid tax fraud and get your returns early – among other benefits.

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Everyone loves getting their tax refund money, but does anyone love filing their taxes? Apparently, only 5 percent of Americans do, says Pew Research, and 26 percent flat out hate it.[1/a>]

Why wouldn’t they? Tax season comes with dangers like filing mistakes, tax debt, fraud, and more. But if you do it right, you can dodge scams and pocket your refund early.

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Tax-filing tips

It’s no secret that tax season can get confusing and even frustrating. Check out this expert advice to make the process as pain-free as possible…

1. Be familiar with the new tax laws

The Tax Cuts and Jobs Act passed in late 2017, but over a quarter of Americans don’t even know it exists, according to NerdWallet.[2]

Americans should note there are still seven income tax brackets, but the ranges have been adjusted. The standard deduction, or the amount of income that you can set aside to protect from taxation, has nearly doubled. And the personal exemption, or the amount of money you can deduct for yourself or your dependents, has been removed. You can read more about these updates here.

“This is the most dramatic remodeling of tax legislation we’ve seen in 30 years,” says Mark Olander, CEO of TaxAudit. “Unfortunately, we expect the new tax law to further increase stress levels and confusion as taxpayers try to understand the impact on their returns.”

And NerdWallet’s study found that confusion to be a reality. Almost half (48 percent) of Americans don’t know what their income bracket is this year, compared to 40 percent last year, and half (49 percent) know their income tax will change, but not how (50 percent).

The less we know, the more likely we are to get audited – and the more likely we are to make poor decisions about our money.

“Knowing your bracket can help you determine the value of any deductions you take and whether a tax-advantaged investment is worthwhile,” says Liz Weston, NerdWallet columnist, and certified financial planner. “When you pay a dollar in mortgage interest, for example, your bracket determines whether you can save 10 cents or 39.6 cents.”

2. File your taxes online

There are a number of online programs that can help you avoid the pitfalls of tax filing and arrange the largest tax return available. They show you how to calculate and file through step-by-step instructions, and some are available for reasonable prices.[3]

For filing tips, check out Debt.com’s guide on How to File Taxes. If you’re curious which software is the best, Debt.com put together a list of the Best Tax Software of 2019 to make choosing easier on you and your needs.

The IRS says four-out-of-five filers will file electronically, and about the same amount will opt for direct deposit, meaning you can get your tax return faster than if you choose to receive a paper check via snail mail.

3. File your taxes early

Credit bureau Experian found that more than a quarter of Americans wait until the last few weeks to file their taxes – and scammers bank on them procrastinating.[4]

For most Americans, Tax Day is on April 15. For scammers, it’s at the end of January – identity thieves want to file and secure your tax refund before you even start thinking about taxes, so they try to move as soon as the IRS starts accepting tax returns.

In 2017, $227 million were collected in fraudulent tax returns, costing the U.S. government $46 million in losses, Debt.com previously reported.

“File early,” says Michael Bruemmer, VP of consumer protection for Experian. It’s the best way to protect yourself. Filing your taxes early also means you can get your tax refund faster, along with avoiding tax extensions and penalties.

4. Take advantage of IRS help

The IRS offers an identity protection PIN program, which gives you a unique number to sign your tax return with to avoid tax fraud. Any return filed without it is rejected. Residents of the following states are eligible for a PIN[5]

  • Florida
  • Georgia
  • District of Columbia
  • Michigan
  • California
  • Maryland
  • Nevada
  • Delaware
  • Illinois
  • Rhode Island

…You also may be able to take advantage of even more resources if you’re part of an IRS interest group. The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs offer free tax assistance to those who qualify. If you make less than $54,000 a year, have a disability or disabilities, are limited in your English speaking, or are 60 years of age or older, you may qualify for free help from the IRS.

If you make up to $66,000 per year, you may qualify for e-File, which is a free way to pay your taxes online.

Beware of tax filing fraud

Identity theft is a big concern around tax season, and knowing how to protect yourself can save you thousands. The IRS provides tips to know whether you’re a victim of tax-related fraud, but there are also some steps you can take to be proactive.[6]

Big tax filing services barely protect customer data

A 2018 report from cybersecurity watchdog group Global Cyber Alliance revealed that 7 out of 8 of the top tax filing software companies chose not to fully secure their email communication with customers – and only half used the bare minimum of identity theft protection.[7]

Only Liberty Tax was found using the highest identity theft protection available. The following are the seven other software companies, ranked by the level of cybersecurity to protect customer email communication:

Use the bare minimum identity theft protection

  • Credit Karma
  • Jackson Hewitt
  • Tax Slayer

Don’t use any identity theft protection

  • Free Tax USA
  • Turbo Tax
  • H&R Block
  • TaxAct

GCA recommends a few tricks to check if emails from your tax filing software company are legitimate:

  • Double-check the sender’s email address. It may look correct, but if you cursor over it with your mouse you might find a completely different address.
  • Don’t click on embedded links in emails. This can be an email phishing scam, where the link downloads software that will steal personal information from your computer. Type the address into your browser’s address bar if you want to visit a site.
  • Don’t email personal or sensitive information. Your tax software provider will always ask you to input the information after securely logging in.
  • Don’t call any customer service phone numbers you see in an email. You can visit your software provider’s official site to log in and double-check the customer service phone numbers.

Be wary of messages that claim to be from the IRS

In 2017, “imposter scams” surpassed identity theft as the top complaint to the Federal Trade Commission for the first time – but it may be a classification issue more than anything else.[8] “The rise in impostor scam reports is due to an increase in complaints about government imposters,” the FTC says. Scammers frequently pose as the IRS.

In 2016, Experian found that 28 percent of Americans have been victims of tax fraud or know someone who is.[9]

Bruemmer says you should never respond to emails, texts, or phone calls from “the IRS” – unless you’ve already heard directly from a verifiable IRS agent through another channel. “Don’t fall for anybody asking for your Social Security number,” he adds.

The IRS says it doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information, and phone calls can be verified by calling 1-800-366-4484.

Filing tips for taxpayers living abroad

Important 2019 filing update for taxpayers living abroad.

The IRS issued a reminder on June 5, 2019, to remind all taxpayers living abroad that they must file their 2018 federal income tax returns by Monday, June 17.[9]>

If you’re living and working abroad, it doesn’t necessarily mean that you’re off the hook in paying your federal income taxes. You do, however, get more time to file. The IRS provides an automatic 2-month extension for filers living aboard. This means your income tax returns are generally due mid-June, rather than mid-April. People who need to file by this date include:

  • U.S. citizens living and working abroad
  • Resident aliens living and working abroad
  • People with dual citizenship living and working abroad

It’s important to note that if you owe taxes to the IRS, you must pay by April 15, even though you don’t file until two months later. If you don’t pay your bill by April 15, then the IRS assesses penalty interest starting on April 15.[10]

Cameren Boatner contributed to this report.

[1] https://www.pewresearch.org/fact-tank/2014/04/15/on-tax-day-americans-views-of-taxes-and-the-irs/
[2] https://www.nerdwallet.com/blog/taxes/2018-tax-report/
[3] https://www.pcmag.com/picks/the-best-tax-software
[4] https://www.experian.com/blogs/ask-experian/tax-time-and-id-theft-survey-results/
[5] https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
[6] https://www.irs.gov/newsroom/taxpayer-guide-to-identity-theft
[7] https://www.prnewswire.com/news-releases/consumer-alert-tax-software-providers-not-protecting-emails-from-phishing-and-spoofing-reports-global-cyber-alliance-300613550.html
[8] https://www.ftc.gov/news-events/press-releases/2017/03/ftc-releases-annual-summary-consumer-complaints
[9] https://www.irs.gov/newsroom/for-taxpayers-living-working-outside-the-us-file-a-return-by-june-17
[10] https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad
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About the Author

Joe Pye

Joe Pye

Joe Pye started writing about debt and personal finance five years ago while attending Florida Atlantic University, where he served as Editor-in-Chief of the student-run newspaper, the University Press. Before graduating with a bachelor's degree in multimedia journalism, Pye placed as a finalist for the Mark of Excellence award by the Society of Professional Journalists Region 3 for feature writing and in-depth reporting. In 2021, Pye earned First Place in the Green Eyeshade awards for "Best Blog" for his side-project BrowardBeer.com. Since taking a full-time position as associate editor at Debt.com in 2018, Pye has become a certified debt management professional who's applied what he's learned to his personal life by paying down more than $22,000 worth of combined credit card, student loan, auto and tax debt in less than two years.

Published by Debt.com, LLC