Preventing Identity Theft During Tax Season

Now is the time of year when many of us are doing our taxes, which makes this the perfect time to learn what identity theft is and how to protect yourself.

Identity theft is defined by the NCUA as, “A crime where a thief steals your personal information such as your full name or Social Security number to commit fraud.” Identity theft is a serious crime that can disrupt your finances, credit history, and reputation and it can be incredibly hard to detect. Most victims are unaware of what’s going on until it’s already happened. It will take time, money, and patience to resolve, so the best way to combat identity theft is through prevention.

Take the First Steps

It’s important to take some basic first steps to protect your personal information. Don’t open unrecognized emails and always shred important documents. Additionally, make sure you monitor your billing cycles and statements, protect your PINS and passwords, and only carry the minimum amount ID information and credit cards on your person at all times.

These may seem like small insignificant things to do, but identity theft can only be detected early through monitoring the little aspects of your money and personal information. While protecting your personal information is a great place to start, do you know how to recognize and prevent becoming a victim of tax identity theft?

Recognizing Identity Theft

According to mycreditunion.gov, tax identity thieves may use your SSN to get a tax refund or even a job, so if the IRS sends you a notice saying that their records show:

• You were paid by an employer you don’t know
• More than one tax return was filed using your Social Security number

Here are some steps you can take to prevent tax identity theft:

1. Get an Identity Protection PIN from the IRS
   The IP PIN is a number that is assigned by the IRS to eligible taxpayers and helps prevent the misuse of your SSN. Learn more about an IP PIN from the IRS here. 
2. Check your mail and bank statements every month
   If you find any irregularities or find and purchases you didn’t make, contact your bank immediately to report the activity. 
3. Monitor your credit reports
   Do you know why your credit report matters or what’s even on it? Do you know how to obtain your three free credit reports every year? Find all these answers from the NCUA’s Credit Reports and Credit Scores educational information. 
4. Your bank or credit union may offer identity theft resources.
   Most banks and credit unions will offer services and materials to help you safeguard your accounts. 

What to do if you think you may be the victim of tax identity theft:

According to the NCUA, the IRS prevents $24 billion in cases in which it’s able to detect and prevent fraud every year, and in 2013, the IRS paid about $5.8 billion in fraudulent tax refunds. If you think you may be the victim of tax identity theft or have been notified by the IRS that something is wrong, contact the IRS Identity Protection Specialized Unit at 1-800-908-4490 to report the fraud. Then, you’ll need to send a copy of your police report or an IRS ID Theft Affidavit Form 14039 and proof of your identity, such as a copy of your Social Security card, driver’s license or passport.


If you get emails claiming to be the IRS, forward it to phishing@irs.gov. The IRS NEVER contacts individuals for the first time via email, social media, or text. Finally, click here for other steps you can take to repair identity theft.

How to Spend Your Tax Return Wisely

When your tax return comes in, you are undoubtedly tempted to spend it on some big ticket item on your wish list. Perhaps you have been waiting to buy a new sofa or you would like to take a vacation. The average taxpayer receives a refund around $3,000 and that is a good chunk of change. The wisest ways to utilize that money are listed below.

Pay Off Debt

The number one thing you should do with your tax return is pay off high interest debt. Any loan or debt you owe incurring more than 5% interest should be paid down as quickly as you can. Credit card debt is especially detrimental, as it can make it very difficult to get ahead and bringing down your credit score. Not only will paying off that debt feel like a relief, but you will be grateful every month when your overdue bill does not come in the mail.

Make Home Improvements

The home improvements you should spend your tax return on are the ones which will give you the highest return on investment. These are not improvements like heated tile floors or new kitchen cabinets, they are the kind that will increase your home's efficiency and decrease your ownership costs for months – or even years – to come. Adding insulation to your home's attic if necessary, replacing old appliances with energy efficient ones, or installing new windows are some of the wisest home improvements. In the long run, the money you spent on these improvements will find its way back in your pocket.

Save it For a Rainy Day

The majority of Americans do not have enough money in savings to protect themselves against sudden setbacks. An emergency fund should always hold 3-6 months of your expenses in the event you lose your job, incur medical bills, have a large car repair, or have to pay for something unexpected. First Choice Credit Union has great savings account options and can meet with you to determine how large of an emergency fund you should have.


It can be hard to refrain from purchasing a wish list item with your tax refund! However, if you choose to spend your tax return wisely through one of these three avenues, you future self will thank you.

Tax Return or Taxes Due – How to Be Smart at Tax Time

Whether this time of year means a tax bill or a nice tax return in your pocket, it’s a time to be thoughtful about these sums of money. Many people spend their tax return too quickly or fret over where to find the money to pay their taxes. We have tips for both situations.

If You’re Receiving a Return...

1)     Pay Your Tax-related Expenses

Even filing your taxes costs money. Use your tax return to pay your accountant or replace the cost of your tax software. If you’re getting a federal return but owe in state taxes, or vice versa, turn around and pay one with the other.

2)     Add it to Savings

It is recommended to have 2-3 months’ worth of income stashed away in a Savings account. This is highly recommended so that emergency situations—like car repairs, medical bills, or family members in need—can be addressed without affecting your week-to-week cash flow. So if your savings isn’t quite healthy enough, or you need to open a Savings account, use your return to do so. First Choice Credit Union has savings account options to fit your specific needs, so contact us to get started.

3)     Pay off Credit Card Balances

Which of your outstanding balances have the highest interest rate? Interest paid is money out the door which doesn’t pay down the principle balance you owe. Get serious about paying down the debt with the highest rate, and buy yourself some breathing room by putting your tax return toward outstanding balances.

4)     Put it in Retirement or Education Savings Accounts

These are the Savings accounts we often overlook because they’re useful so far in the future. We are creatures of the present, and saving for a moment 10, 15, or 20 years down the road is not exciting, even if it is a huge ticket item. Between college tuition and retirement, the average couple will need well over $1 million. Sound daunting? Speak with one of our representatives about our Education or Retirement Savings options to make a plan for your future.

If You Owe Taxes...

If you’re one of the 20% of taxpayers who won’t get a refund, but an “amount due,” don’t panic. Depending on the amount you owe and your available monies, you’ll find a way. But by all means, do not put it off or ignore it for a few months. IRS charges failure-to-file and failure-to-pay penalties if you are beyond the deadline, and these accrue month over month. So how do you approach this new bill in a smart way?

1)     Save From Now until April 15th

If you’ve discovered your tax bill in February, you still have two months to save up that amount before the April due date. Whether you stay in, eat in, skip Valentine’s gifts, or put off paying for something else, see if you can use this time to prepare for your tax payment.

2)     Pull from Emergency Funds

Remember #2 above? This is one of those situations that could pull from a robust savings fund without affecting your day-to-day. Here’s to savings!

3)     Enter into an Installment Agreement with the IRS

If you owe less than $50,000 and haven’t set up an installment agreement in 5 years, you could fill out a monthly payment request online. You can request a specific monthly payment, which is preferable to putting your tax payment on a credit card with a high interest rate.

4)     Ask for Extended Time

If extraordinary circumstances keep you from being able to pay your taxes on time, you may be able to prove you need an extension. Using the same payment agreement application, you may be able to buy yourself some time.

First Choice Credit Union can help you with any financial services, whether you’re celebrating a refund or glaring at a tax bill. Good Luck this tax season!