Don’t Let a Scammer Steal Your Tax Refund

But imagine if that check just never shows up. Instead, you get a notice from the IRS saying your taxes have already been filed and a refund has been sent. It may be that you've become a victim of tax-related identity theft.

Each year identity theft tops the list as the biggest scam to affect consumers. Tax fraud accounts for a large chunk of that. The National Consumers League has sent out a Special Fraud Alert stating that more than 46 percent of Federal Trade Commission identity-theft complaints stemmed from government documents or benefits fraud, much of that tax-related.

(MORE: File Your Taxes With Less Stress)

It’s a big problem and the IRS knows it. The IRS says that from 2011 to November 2013, it put a halt to 14.6 million suspicious returns and protected $50 billion of what could have been fraudulent refunds.

While those numbers are impressive, you can’t help but wonder how many fraudulent refunds slipped through the cracks. A report from the Treasury Inspector General for Tax Administration found that about $3.6 billion worth of fraudulent tax refunds were issued in 2011. The good news is, that is down considerably from the $5.2 billion for the 2010 tax year.

So how do you know if you are victim? The Federal Trade Commission says there are two red flags that can alert you to potential tax fraud: If the IRS sends you a notice that more than one tax return was filed under your Social Security number or if IRS records show you were paid by an employer that you’ve never heard of.

(MORE: IRS Audit Odds and Strategies)

In the first situation, that probably means someone has already used your Social Security number to file taxes. When you send in your real tax return weeks or months later, it appears in the IRS’s system as if this is the second time you’ve filed.

In the latter situation, it likely means someone used your Social Security number to get a job. It could be an undocumented worker or someone trying to hide a criminal background. Whatever the reason, this will appear to the IRS as if you failed to report all your income. In reality, those wages were earned by someone else.

In both cases, the IRS will send you a notice or letter. Keep in mind, the IRS will never initiate contact through email, text message or social media channels asking taxpayers for personal or financial information. So if you receive something via those lines of communication, it’s almost certainly a phishing scam.

If you receive a call from someone claiming to represent the IRS and feel uneasy about it, hang up. And if you get an email that seems fishy, go to IRS.gov and initiate direct communication yourself.

If you suspect you are a victim of tax-related ID theft, call the IRS’s Identity Protection Specialized Unit at 1-800-908-4490 to report fraud. The identity theft may not stop with your taxes. After you’ve reported the theft to the IRS, the FTC says, it is important to check your credit reports for fraudulent activity, put a fraud alert on your credit reports and create an Identity Theft Report by filling a police report and complaint with the FTC.

Filing tax returns electronically and using direct deposit is the best way to ensure your refund gets to you safely and in a timely matter. Yet, the IRS says more than 25 million taxpayers still request paper refund checks mailed to them. If you’re one of them, this may be the year you want to consider switching to direct deposit.

Emmy Award-winning broadcast journalist, documentarian and author Jeanette Pavini covers consumer and investigative news for numerous publications, radio and television. Jeanette is based in the San Francisco Bay Area.

By MarketWatch