During tax-filing season there is a higher risk of tax-fraud scams and identity theft as fraudsters look to claim bogus refunds. Though the Internal Revenue Service and financial institutions have made substantial progress in the battle against identity theft-related tax refund fraud, credit unions and credit union members should remain vigilant in recognizing potential tax refund fraud warns the Credit Union National Association (CUNA). 

During the tax season, you may see fraudsters: 

  • File fraudulent tax returns early in the tax filing season and have the refunds electronically deposited to accounts at credit unions via ACH. 
  • Open fraudulent accounts at credit union for depositing the tax refunds. 
  • Convince an existing member to receive fraudulent refunds to their credit union account and forward the proceeds to the fraudster. 

Identity theft can be a precursor to tax-refund fraud because individual income tax returns filed in the United States are tracked and processed by Taxpayer Identification Numbers, and the individual taxpayer names associated with these numbers. Criminals can obtain TINs through various methods of identity theft, including phishing schemes and the establishment of fraudulent tax preparation businesses.

The IRS offers the following tips to help prevent fraud:

  • File for your tax refund as soon as your have the necessary documents. Once the IRS receives a return with a Social Security Number, it rejects any duplicate requests.
  • Change your passwords every year on any accounts you use to file. This is also a good practice for any sensitive accounts you maintain online.
  • Monitor your refund for suspicious activity. If more than one tax return was filed using your SSN, you owe additional taxes you were not expecting, or IRS records show you had a higher income, or income from an employer you do not recognize, these may be red flags that your tax refund is being targeted.