Recently, the IRS has more vigorously investigated identity theft schemes which steal taxpayers’ refunds. These acts of fraud can not only significantly delay an individual’s refund, but they can cause a great deal of time and stress to resolve. This article describes how tax identity theft typically works, information on how to protect yourself and how to proceed if you become a victim of identity theft.
A typical tax identity theft involves someone who uses another taxpayer’s identity and Social Security number to deceitfully file a tax return and receive a refund from the IRS. The victim is commonly apprised of the fraud only when he or she files a tax return and the IRS informs them that the return has been rejected because a tax return was already filed for the same year under that Social Security number. The refund is then delayed until the IRS can determine the validity of the taxpayer.
There are a number of ways thieves can obtain your Social Security number to file a tax return: hacking business or personal computers, calling an individual under the guise of an official or business requesting confidential information or even stealing personal statements from a mailbox or trashcan. While there is no way to completely protect yourself from tax-related identity theft, there are some steps you can take to minimize your risk:
If you are a victim of tax refund fraud, the IRS will contact you BY MAIL after it is verified that your return has been previously filed. They will provide identity confirmation via the Identity Certification Service (IDVerify) on IRS.gov or at a toll-free number provided. It is also advisable to prepare and submit an Identity Theft Affidavit on IRS Form 14039. In addition, make a report on the IRS Tax Fraud Hotline at 1-800-829-0433. Once your account has been resolved, the IRS will issue and mail to you an Identity Protection Personal Identification Number (IP PIN). This number will verify that you are legitimate when you file future tax returns and it will prevent the processing of fraudulent returns.
If you are the victim of an identity theft crime, file a complaint with the Federal Trade Commission (FTC). Also, contact your local police. Closely monitor your credit card accounts and contact one of the credit report companies (Equifax, Experian or TransUnion) to have a Fraud Alert placed on your account.