You finally sit down to file your tax return, hit “submit,” and, surprise, someone’s already done it using your Social Security number. It’s a sinking feeling that thousands of taxpayers experience each year, including over 2,500 Nebraskans who reported identity theft in 2024.  

While tax identity theft poses a serious threat, the good news is that a few proactive steps can go a long way toward protecting your information and minimizing your risk. Here’s how to prevent, detect, and respond to tax identity theft before it impacts your financial security. 

What Is Tax Identity Theft? 

Tax identity theft occurs when someone uses your personal information, typically your Social Security number, to file a fraudulent tax return and claim your refund. It can also happen if someone uses your details to gain employment or access financial benefits in your name. There may be indicators from the IRS that this has occurred, such as: 

• Your e-filed return is rejected because one was already filed. 
• You receive an IRS notice about wages from an unfamiliar employer. 
• You get mail from the IRS that doesn’t match your filing activity. 

Knowing what to look for helps you act quickly before the damage spreads. 

Tax Identity Theft Prevention Strategies
 

1) Secure Your Tax Data Online 

Use encryption and multi-factor authentication whenever you can. Always try to: 

• Use tax preparation software with built-in encryption. 
• Enable two-factor authentication on your accounts. 
• Keep antivirus software updated. 
• Avoid public Wi-Fi when accessing financial information.
  

A few extra seconds of precaution can save you hours of cleanup later. 

2) Create Strong Passwords for Tax Accounts 

Complex passwords are your first line of defense. Use memorable phrases mixed with numbers and symbols, and make each password unique. A reputable password manager, like LastPass, Dashlane, or Bitwarden, can help keep track of them so you don’t have to. 

3) Utilize IRS Tools That Help Prevent Tax Fraud 

The IRS offers several security measures to protect taxpayers: 

• Identity Protection PIN (IP PIN): A six-digit code that changes annually to verify your identity before a tax return is accepted. 
• Tax Transcripts Monitoring: Regularly review your tax records for unauthorized filings. 
• Online Account Access: Track refunds, payment history, and account activity. 
• IRS Notifications: Sign up for email or SMS alerts about account changes. 
• Form 14039: File this Identity Theft Affidavit proactively if you suspect fraud. 

Together, these tools create multiple layers of protection around your tax data. 

4) File Your Taxes Early to Prevent Fraud 

Filing early doesn’t just mean getting your refund sooner; it also reduces the window of opportunity for criminals to file a fraudulent return using your information. Once your legitimate return is on file, scammers are blocked from submitting a duplicate. 

5) Keep Your Tax Documents Safe Year-Round 

Protecting your sensitive information requires consistent attention: 

• Choose direct deposit for refunds to avoid stolen checks. 
• Store W-2s, 1099s, and other documents in secure digital or locked physical locations. 
• Shred old records before disposal. 
• Be cautious when sharing personal information, even with family or friends. 

6) Learn to Spot IRS Scams and Fake Messages 

The IRS will never: 

• Email, text, or DM you to request personal or financial information. 
• Threaten lawsuits, arrests, or account suspension over the phone. 
• Ask for your Identity Protection PIN via phone or text.
  

If you get a suspicious message claiming to be from the IRS, don’t click any links or provide information. Legitimate IRS communication arrives through official U.S. Mail. 

What to Do If You’re a Victim of Tax Identity Theft 

If your e-filed return is rejected or you receive a suspicious IRS notice, take immediate action: 

• Call the IRS Identity Protection line listed on the notice. 
• Submit Form 14039 (Identity Theft Affidavit) to alert the IRS of potential fraud. 
• File a police report and contact credit bureaus to place a fraud alert on your credit records.  Consider requesting a credit freeze to prevent new accounts from being opened.
  

After You Report 

Once you’ve alerted the IRS, continue taking steps to protect yourself and document everything. Keep copies of all correspondence and filed forms, and record dates of calls or notices. Monitor your IRS and state tax accounts for new activity, check your credit reports regularly, and update passwords or IP PINs as needed. Maintaining detailed records and staying vigilant will help resolve fraudulent activity faster and reduce the risk of future incidents. 

How to Maintain Tax Identity Protection Year After Year 

Maintaining tax security requires regular vigilance. Here's a timeline for ongoing protection: 

Monthly Monitoring 

Review your bank and credit card statements for unusual charges. Keep your antivirus and security software updated. Pay attention to credit-monitoring alerts that can reveal early signs of identity theft. 

Quarterly Check-Ins 

Every few months, log in to your IRS Online Account to review your transcripts for unauthorized activity. Check one credit bureau report per quarter (Equifax, Experian, TransUnion) to stay ahead of potential issues. 

Annual Reviews 

Include tax-identity protection in your yearly financial checkup. Request your free credit reports, confirm your IP PIN information is current, and verify your contact details with the IRS. Review your tax withholdings and ensure your security software is still active. 

Protect Your Identity with Lutz’s Tax Experts 

Tax identity theft can happen to anyone, but you don’t have to face it alone. At Lutz, our tax team helps clients implement effective protection strategies and respond to suspected theft. Contact us to explore how we can help protect your financial security and manage tax-related identity concerns.