Please ensure Javascript is enabled for purposes of website accessibility

Here's the No. 1 Way to Prevent Tax Identity Theft

By Wendy Connick – Jan 22, 2018 at 2:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Tax identity theft is likely to be bigger than ever in 2018 -- but there's an easy way to protect yourself.

The Equifax hack in late 2017 let to the theft of as many as 143 million Social Security numbers, which means 2018 is likely to be a banner year for tax identity theft. If a fraudster has your name, date of birth and Social Security number, he can file a tax return for you claiming an enormous refund -- then grab the refund and disappear, leaving you to deal with angry IRS agents. However, there's one simple way to make it nearly impossible for fraudsters to file returns in your name.

File your tax return early

Once the IRS receives a tax return with a particular name and Social Security number, it will not accept any other returns with the same information. Thus, if you can get your tax return completed and filed with the IRS before any fraudsters can do the same thing, they'll be shut out and you'll be in little to no danger of tax identity theft.

The deadline for tax filing in 2018 is April 17, but you can file your return as soon as you have all the necessary information. The IRS won't start processing tax returns until Jan. 29, but the agency will gladly accept your return before then.

Faceless hacker in hoodie using a laptop

Image source: Getty Images.

How to get your tax return in ASAP

You can't file your tax return until you have all the information you need to fill out the forms. Employees will need a W-2 from their employers detailing how much they received in wages and how much the employer withheld in taxes. Most investors will have to wait until they receive their brokerage tax statements, including any 1099-DIV and 1099-INT documents. And you'll need the documents required for certain tax breaks if you're claiming them, such as the 1098 form from your mortgage lender for the mortgage interest deduction.

In some cases you may be able to expedite delivery of these documents; for example, if you have a friend in the HR department you may be able to get your W-2 early (or at least get the information from it that you need to file your taxes). In other cases, you'll just have to hope for the best -- brokerages aren't required to get the last of your tax documentation out to you until mid-February, and many wait until the last minute to deliver those documents.

Organization is key

If you can't get your documents early, the next best thing is to organize everything you do have so that as soon as you receive the final piece of information, you can boot your tax return out the door. You can start organizing your tax paperwork right away; dedicate one or more folders in a filing cabinet or similar location to hold tax documents, and put each document in its place as soon as it arrives. For example, if you're planning on claiming the medical deduction, have a folder specifically for medical receipts and put each receipt in that folder as soon as you get it.

Once the tax year ends and you know you won't have any more receipts coming in, you can start totaling them up. Spreadsheets and budgeting programs can make this process significantly easier and will also give you an extra layer of documentation in case the IRS asks some pointed questions. The idea is to do as much of the background work as possible beforehand, so that when you receive that last document you've been waiting for, it'll take you just a few minutes to complete your return and send it on its way.

E-file for maximum speed

If you're still sending in tax returns through the postal mail, consider switching to e-filing this year. When you e-file your tax return, not only does it instantly arrive at the IRS, but you get an acknowledgment of receipt back from the agency. If there's a problem with your return (such as a fraudster having already filed one for you), you'll also be notified quickly of the nature of the issue -- which means you can deal with it fast.

Getting your tax return completed and out to the IRS as soon as humanly possible can be a challenge, but it's far less of a hassle than untangling a tax identity theft issue would be. And at least getting your taxes done so early will mean you have one less financial issue to worry about for the current year.

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.