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Beware these 'dirty dozen' tax scams that can cost you big and even land you in jail

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Identity theft
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Identity theft | Chad Slattery/Getty Images

Identity theft

Last year, identity theft was at the top of the dirty dozen tax scams list. It's still a big problem, but the IRS is working with state tax agencies and the tax industry to improve the situation, and they've made progress. In 2016, for instance, the number of taxpayers reporting stolen identities on their tax returns fell by 50 percent-plus, with about 275,000 fewer victims than the year before.

Tax-related identity theft occurs when scammers with stolen Social Security numbers file tax returns before the real, unsuspecting taxpayers do so. The crooks end up collecting fraudulent refunds.

The IRS advises taxpayers and tax pros to always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and can automatically update.

Encrypt sensitive tax records stored on the computer, and use strong passwords. Always protect your personal data.

The IRS has a special section on IRS.gov dedicated to identity theft issues. If you discover or fear you are a tax ID theft victim, contact the IRS Identity Protection Specialized Unit toll-free at (800) 908-4490.

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