The threat of tax return identity theft remains a growing problem. Learn the signs of potential fraudulent activity, how to reduce your risk, and actions you can take if you become a victim of tax return related identity theft.
For 2016, the Internal Revenue Service, states and the tax industry joined together to enact new safeguards and take additional actions to combat tax-related identity theft. Many of these safeguards will be invisible to you, but invaluable in the fight against fraud. If you prepare your own return with tax software, you will see new log-on standards. Some states also have taken additional steps. See your state revenue agency’s website for additional details.
Tax-related identity theft occurs when someone uses your stolen Social Security number (SSN) to file a fraudulent tax return claiming a refund.
You may be unaware that this has happened until you electronically file your return and discover that a return has already been filed using your SSN. Or, the IRS may send you a letter saying they have identified a suspicious return using your SSN.
The Government Accountability Office (GAO) issued a report to Congress in January 2015 titled, “Identity Theft and Tax Fraud.” In the report, the IRS estimated that it prevented $24.2 billion in fraudulent identity theft refunds in 2013, but paid $5.8 billion later determined to be fraud. This equates to 14.6 million suspicious returns. That same year, the IRS initiated 1,492 identity theft-related criminal investigations, an increase of 66 percent over investigations initiated in fiscal year 2012. Indictments and sentencing doubled in FY 2013 and the average prison term was more than three years (38 months) — the longest sentence being 26 years.
Signs that you are a victim of tax-related identity theft
• More than one tax return was filed using your SSN.
• You owe additional tax or have had collection actions taken against you for a year you did not file a tax return.
• IRS records indicate you received wages or other income from an employer for whom you did not work.
• Suspicious activity appears in your credit report.
Steps to take if you become a victim
If you are a victim of identity theft, the Federal Trade Commission (FTC) recommends these steps:
• File a complaint with the FTC at https://www.identitytheft.gov/.
• Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records:
- Equifax, www.Equifax.com, 1-800-766-0008
- Experian, www.Experian.com, 1-888-397-3742
- TransUnion, www.TransUnion.com, 1-800-680-7289
• Contact your financial institutions and close any financial or credit accounts opened without your permission or tampered with by identity thieves.
If your SSN is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:
• Respond immediately to any IRS notice; call the number provided or, if instructed, go to https://idverify.irs.gov/IE/.
• Complete IRS Form 14039, Identity Theft Affidavit, if your filed return is rejected because of a duplicate filing under your SSN, or if you are instructed to do so. Use a fillable form at IRS.gov, print, then attach the form to your return and mail according to instructions.
• Continue to pay your taxes and file your tax return, even if you must do so by paper.
If you previously contacted the IRS and did not have a resolution, request specialized assistance by calling 1-800-908-4490.
How to reduce your risk
• Always use security software with firewall and anti-virus protection. Use strong passwords.
• Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card companies and even the IRS.
• File your taxes early. This year, the IRS will begin accepting returns (both electronic and paper) as of January 23, with a deadline of April 18.
• File your taxes electronically and have your tax refund sent to your bank account electronically.
• Do not click on links or download attachments from unknown or suspicious emails.
• Protect your personal data. Do not carry cards with your SSN (e.g., some military retiree and dependent identification cards, Medicare cards, etc.).
• Properly safeguard old tax records.
• Review your credit report at least annually. Utilize the government-sanctioned website AnnualCreditReport.com. You will be asked for your SSN and date of birth for authentication purposes.
It is important to know that the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media.