WEATHER IN LINCOLN COUNTY

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ID Theft and Tax Fraud – Duane J. Silbernagel

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Duane J. Silbernagel Financial Advisor Waddell & Reed

Duane J. Silbernagel
Financial Advisor
Waddell & Reed

Sponsored Information

ID Theft and Tax Fraud
Duane J. Silbernagel

As we wind to the close of another tax filing season (unless on extension) I wanted to spend some time addressing an increasingly common crime: identity theft and tax fraud.

This is what usually happens: first, someone gains access to a person’s Social Security Number (through data breach or another way). This person then creates a false 1040 tax return and files it with the IRS. Some of these have been very elaborate, with falsified W2’s and corporate tax filings. The filing is prepared in such a manner to show an overpayment of taxes – so a refund is issued.

As there is no notification from the IRS to the victim that a tax return has been received, the issues arise when the real person with that Social Security Number submits the real tax documents to the IRS for review. At this point, red flags are raised and the victim of the crime must prove who they are, while also waiting for their actual returns to be paid out; while the criminal has the refund and is very hard to track down.

How does one protect their identity? In today’s age, our information is everywhere. Hospitals and medical care providers are switching to electronic medical records to comply with the Affordable Care Act, banks are offering more services via mobile apps, and businesses use software (or cloud based) packages to run payroll, contribute to 401(k) and pay for medical insurance premiums. Society is changing rapidly. Technology is fantastic, but it also comes with a new level of risk.

One of the easiest ways to prevent being a victim of a fraudulent tax filing is to file as early as possible. Remember, the issues arise when the second filing is recorded. There can still be issues if a second, fraudulent return is filed later, but it will not tie up the processing of the actual return.
Naturally, fraudulent tax returns are a subset of an underlying factor – identity theft.

What can individuals do?

Act Quickly:
In order to be held liable for as little as possible, one must act in a reasonable amount of time. In order to prevent a tax return from being filed by someone else, complete the tax filing as soon as possible. Time is literally money.

File a Police Report:
Identity theft is a crime, so filing a formal police report is necessary in case other issues should arise in the future.

Contact Financial Institutions:
Alert any financial institution that interactions occur with and alert them of the fraud. This can include a bank, credit card companies – even a company that keeps a 401(k), or other retirement plan and/or investments that are held.

Contact the Credit Bureaus:
There are three major credit bureaus:
Equifax – 1 (888) 766-0008
Experian – 1 (888) 394-3742
TransUnion – 1 (877) 322-8228
Once any of these is made aware of fraud, the other two receive notification. The phone numbers for the fraud alert department for each respective bureau is provided.

Consider purchasing ID Theft Insurance:
There are dozens of companies out there now that will help fight this growing trend. While I cannot speak to any one company in particular, find a company that will assign an individual to the specific case that can take care of the headache. This will allow the victim to remain focused on daily responsibilities and not on handling the issues at hand.

Remain Diligent:
Unlike common theft of property, once the personal information has been stolen, it cannot be secured again – like a car, or television can. Even if the person responsible is found, there is no way to know the limits that the data has traveled. Monitor the financials on a consistent basis.

There is no replacement for being as careful as possible with personal information. Like my grandma always says “an ounce of prevention is worth a pound of cure.” If you run into a scenario where an identity was stolen, remain patient. Remember, those who issued credit to someone with falsified documentation will have to eat that loss (so the victim doesn’t have to). The victim is not to blame, although the companies may make it feel that way.

If you’d like to find out more about me, this topic or have an idea you’d like me to write about or would simply like to contact me – visit my website: www.duane.wrfa.com.

Thank for your interest.

This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Waddell & Reed does not provide legal or tax advice. Please consult with a professional regarding your personal situation prior to making any financial related decisions.

Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. He can be reached at (541) 614-1322, via email at DSilbernagel@wradvisors.com. 

Waddell& Reed is not affiliated with www.newslincolncounty.com website and is not responsible for any other content posted to this website.  (04/15)

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