Photo: Flickr / OkayCityNate
If you’re waiting to file your taxes until the last minute, you’ve got plenty of company. The IRS says that 20 to 25 per cent of taxpayers file within two weeks of the April 15 deadline, while another 7 per cent get an extension. But those who wait risk paying more – and are more likely to be victims of identity theft.
The cost of tax prep software often spikes in late March, and if you or your tax professional is rushed, you’re more likely to make costly mistakes, be forced to file for an extension, or worse, miss the deadline. An annual tax preparation survey of 1,105 people done last year by electronics seller TechBargains.com found that the tax preparation fees of people who filed in April or filed for extensions were nearly double those who filed in January and February: $163 versus $87.
Even more worrisome is that identity theft criminals who target tax returns usually go after late filers, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service. Crooks who assume someone else’s tax identity typically file early so that the IRS processes the return and sends them a refund before the victim has a chance to file.
Tax-related identity theft has skyrocketed in recent years and now makes up the largest category of identity theft crime. The IRS was processing 650,000 identity theft cases as of last September – a 650 per cent increase from 2008.
An identity theft criminal only needs to get hold of your name and social security number, so the IRS suggests carefully guarding your SS number. When the IRS realises the income on the return is wrong, or if your return is rejected because of duplicate returns from the same SS number, it could result in a lengthy, costly process to prove your identity.
If you are a victim of identity theft, the IRS has a list of instructions to follow here. The IRS says identity theft victims should expect to wait six months for their returns to be processed, with complicated cases taking longer. The National Taxpayer Advocate, the watchdog arm of the IRS, says the long wait times are likely because the IRS has 21 different units that all deal with identity theft cases, which forces victims to navigate a complex maze to get their cases resolved.
What’s more, increased security measures at the IRS, plus the many last-minute tax changes from the January fiscal cliff deal, mean that in general, checks are taking longer to issue, particularly large ones, says David Martines of accounting and advisory services firm Baker Newman Noyes. It’s all the more reason to sit down with your taxes sooner rather than later.