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One of the recommendations to avoid tax return fraud/identity theft is to file your taxes as early as possible:

It seems to me that you will never beat a fraudster at their own game.

  • You are concerned with the accuracy of your return. A fraudster just wants to get the maximum refund.
  • You have to wait for documents to arrive, e.g. from your employer, bank, brokerage, and dependent's day care provider. The fraudster just needs a W-2.
  • You have a day job and family responsibilities. Defrauding you and the IRS is the scammer's day job.

It seems to me that you can never file your taxes faster or sooner than a fraudster. So, how is this advice useful?

29

I agree, it is not a great suggestion.

The idea for it comes from the fact that a tax return can only be e-filed for an individual once. If a second tax return is attempted to be e-filed, it will come back with an error. Obviously, if you file your return earlier rather than later, it closes the window of when a fraudster can e-file a fake return for you.

However, as you said, there are lots of reasons why you should not file the return before you are really ready.

If the fraudulent return does get filed before you get around to your real one, it's not the end of the world. When you try to e-file yours, you will get an error that a tax return has already been filed for you. That will be your indication that there was a problem. The IRS knows that this happens a lot, so if you contact them and explain the problem, they will tell you what to do. (It will probably involve mailing in your tax return along with IRS Form 14039.)

  • 2
    Is it possible/feasible to immediately file electronically and then file an amendment once you actually have the required information? – Rob P. Sep 12 '17 at 22:51
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    From a logistics point of view, no, because filling incorrectly is very different than dealing with fraud. Filling incorrectly is your fault, whereas fraud is someone else's fault. The process for fixing incorrectly filed tax returns are very different than the process for dealing with a fraudulent claim. – Nelson Sep 13 '17 at 2:08
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    @RobP. That would not be recommended. When you e-file, you are affirming that what you have sent is accurate to the best of your ability. Knowingly submitting a false tax return with the idea that you would correct it later is not legal. – Ben Miller Sep 13 '17 at 3:08
  • @BenMiller If you get the correct information from your own records (bank statements, pay stubs, etc.) before someone sends you their opinion, that is not fraud, even if you make a mistake. – DavePhD Sep 13 '17 at 15:08
  • @DavePhD Admittedly, I don't e-file, and when you mail in your form, you are required to submit copies of your W-2s, so I have to wait until I receive those. However, in my opinion, it is not worth it to jump the gun and file your taxes early, knowing that you will likely have to amend it, just to attempt to thwart the possibility of someone filing a fraudulent return. – Ben Miller Sep 13 '17 at 15:26
4

It's not 100% foolproof, but it seems to be reasonable advice.

I file my taxes as soon as I can if I'm getting a refund, and closer to April 15th if I owe taxes. So if I get W-2s in early February, and I file in mid-February, that's only a 2-3 week window for someone to beat me to the punch.

So to say that you will never beat an identity thief seems too absolute. The pain (for you and the IRS) of dealing with return fraud is a decent incentive to file early, but you also want to make sure that your return is accurate and you have fully taken advantage of all deductions. I would certainly not rush the process just to try and front-run ID thiefs.

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    If you owe money, I think you can specify the date that they should take the money from your bank or credit card. So you can file early and tell them to take the money close to April 15. – Barmar Sep 12 '17 at 20:53
  • Admittedly, the longer you wait, the larger the window. An extreme example is someone who was waiting until October 16th (automatic extension date this year) and was included in the Equifax hack. – stannius Sep 13 '17 at 15:00
  • D Stanley, if you often owe (significant) taxes, aren't you paying estimated taxes quarterly anyway? – Matt Chambers Sep 13 '17 at 16:58
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    @MattChambers not necessarily. Happened to me once when I converted a rollover 401(k) to a Roth IRA. – stannius Sep 13 '17 at 17:37
  • @stannius Same here - I took advantage of the two-year conversion offer and had significant tax due the first year (but no penalties) – D Stanley Sep 13 '17 at 18:12
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I don't think the suggestion is saying "If you file the moment it's possible, you will beat all thieves". That's absurd on its face, particularly as the thief can file before your W2 is available to you.

However, if you assume you're a random target, then thieves will be presumably filing returns over the entire January-April timeframe. Making sure to file during the earliest reasonable window will decrease the threat envelope, meaning you have a reduced likelihood of having a fraudulent return filed using your information.

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