Doing your taxes is aggravating. And human beings being human, they tend to postpone aggravation for as long as possible. But there’s something more irritating than paying your taxes: having your tax refund stolen. And the later you file, the more at risk you are.
W2 Scams and You
How can someone steal your tax refund? It's actually not that hard.
First, the bad guys steal your W2 form, often around the time they're issued in January. Most commonly, they will do this electronically through a fake request that appears to come from a company’s senior executive and is sent to a lower level employee in the personnel department. One such email read, “Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.”
The clerk in the personnel department quickly complies. Now the bad guys have dozens, hundreds, or even thousands of real W2 forms—including yours.
Those forms have your name, Social Security number, income, and tax withholdings. With your W2 and that information, the scammers prepare a phony tax return and direct the refund to their own bank accounts. Then when you go to file your taxes, the IRS won’t issue your refund. Oh, you’ll probably get it eventually, but not until you prove that your tax account information was stolen.
Meanwhile, though, the bad guys have your personal and financial information, which they could use to open credit cards or bank accounts in your name.
What a mess.
The IRS estimates that in 2017, there were 597,000 fraudulently filed tax returns. In 2016, this cost the government between $1.68 million and $2.31 billion.
Taxpayers can defend themselves against these scams in two ways.
First, file your taxes early. That will shorten the time that the bad guys will have to steal your W2s and file tax returns. If you file before they do, you’ve beat them at their own game. Of course, being first to file has other advantages too. "Those who file earliest will be first in line for refunds,” notes Kathy Pickering, a Vice President at H&R Block.
Second, you can visit the IRS’s filing status webpage and check to make sure that no one has filed “your” tax returns yet. If your W2s have been stolen, the sooner you catch on the sooner you’ll get things straightened out.
If you have been ripped off, you can file an identity theft affidavit with the IRS. This will begin the process of setting things right for you.