Every Spring (and Fall for those of us who filed extensions), millions of honest tax-paying citizens file their returns, willfully submitting their personal information to the IRS, whether it be through attorneys, seasonal tax-employees, tax software or good old-fashioned snail-mail. Unfortunately, every year about this time a percentage of those millions fall victim to tax-related identity theft.
This sort of identity theft is on the rise, with around 1 million fraudulent tax returns being filed in 2012 alone—including an outlandish account of one taxpayer filing under 5,500 different names. The IRS has made preventing tax-related identity theft one of its top priorities in recent years, stopping “14.6 million cases from 2011 through November 2013.” But despite their best efforts, the onus ultimately falls on you, the taxpayer, to protect yourself.
Exposing Tax-Related Identity Theft
The entire fraudulent filing system depends on the counterfeiter making the play before you do. That is to say, they use your stolen Social Security Number and unscrupulously file your refund claim before you get the chance. Then when you go to file your return, the IRS records will show the first filing and refund. Naturally they will think that you have already filed and received your refund, making you the victim, delaying your refunds and exposing you to further identity-theft complications.
Tips to Prevent Identity Theft
The best way to protect yourself from becoming a victim is to remain vigilant and be on the lookout for any suspicious activity. Identity thieves need your identifying information to gain access to your personal accounts. Since your Social Security number is basically the skeleton key to those accounts, it is a good idea to never carry it or any document that contains your SSN on your person. This will prevent unfortunate accidents like the documents slipping out of your purse at the checkout counter or sliding out of your back-pocket as you reach for your wallet. It is best to secure personal information like this in your home.
Fortify your SSN further by not giving it out to businesses or other solicitors when they request it. The IRS does not use emails or texts to contact you, so make sure you ignore those messages. Keep your personal information secret and only divulge it when absolutely necessary.
Armed with the knowledge that the identity thief needs to file your refund ahead of you to benefit, stay on top of your mail. Check to make sure you received pertinent tax forms on time, such as your W-2 and Form 1099. If you do not receive the forms, follow up with the financial institution responsible to find out when they were mailed.
Handling Identity Theft
If more than one return was filed under your name, IRS records show that you received more wages than you really earned or you have a balance due for a year you did not file a tax return, it is correct to suspect that you have been the victim of identity theft. If so, contact the IRS immediately.
The problem is so widespread that the IRS now employs a large division of specialists whose sole job it is to help you through this process and also verifies each return for ID theft, delaying the processing of your return. They will work with you to get you the refund you are owed, strengthen your account from future identity theft, and investigate how the ID theft occurred.
In addition to reaching out to the IRS, we recommend putting a fraud alert on your credit reports and reporting your situation to the Federal Trade Commission. It is also wise to close any accounts you have reason to believe have been altered or opened without your consent.