Tax season should be a time for financial reimbursements, not anxieties about stolen identities. Yet, countless taxpayers face the harsh reality of tax-related identity theft each year. Criminals steal personal information, including Social Security numbers (SSNs), to file fraudulent tax returns and claim your hard-earned refunds.
This comprehensive guide empowers you to understand and combat tax-related identity theft. Learn how to safeguard your financial well-being and navigate tax season with peace of mind.
Understanding Taxpayer Identity Theft
Taxpayer identity theft occurs when someone uses your stolen SSN to file a fake tax return and claim a refund in your name. The first sign of trouble often arises when you attempt to e-file your return, only to discover a return already filed under your SSN.
Alternatively, you might receive an unexpected IRS notice regarding a suspicious return. Remember, the IRS initiates contact solely via USPS mail – never trust phone calls, emails, or text messages claiming to be from the IRS.
Spotting the Red Flags
Be vigilant for these indicators that you might be a victim:
- IRS Notice: An IRS letter about a suspicious return you didn’t file.
- E-filing Issues: Inability to e-file due to a duplicate SSN.
- Mystery Tax Transcripts: Unrequested tax transcripts arriving by mail.
- Unauthorized IRS Account: Notices of an online IRS account created or accessed without your knowledge.
- Tax Discrepancies: IRS notices about additional tax owed or refund offsets for a year you didn’t file.
- Unfamiliar Wages: IRS records showing wages from an unknown employer.
- Unexpected EIN: An Employer Identification Number (EIN) assigned that you didn’t request.
Immediate Actions for Victims
If your personal information is compromised, take these steps:
- Continue Filing: Don’t neglect to file and pay your taxes owed, even if it means filing a paper return.
- IRS Form 14039: Include IRS Form 14039, Identity Theft Affidavit, with your return.
- Respond Promptly: Immediately address any IRS notices to avoid further complications.
- Report the Theft: File a report and create a recovery plan on IdentityTheft.gov.
- Fraud Alert: Contact credit bureaus (Equifax, Experian, TransUnion) to place a fraud alert, potentially reducing future issues.
- Close Compromised Accounts: Secure any financial accounts opened by the thieves or compromised during the data breach.
Protecting Your Information: Prevention is Key
Here’s how to shield your data from criminal activity:
- Secure Documents: Keep tax records and your Social Security card in a safe place. Shred old documents before disposal.
- Online Security: Use multi-factor authentication for tax preparation software. Don’t respond to suspicious emails or texts requesting financial information.
- IRS Identity Protection PIN: Request a free six-digit IRS Identity Protection PIN for an extra layer of security against fraudulent tax returns.
What If Someone Uses Your SSN for Work?
If someone uses your SSN to earn income, you might receive an IRS notice about unreported earnings. In such cases, review your Social Security work history by creating an account on the Social Security Administration website. If you find errors, contact them to rectify discrepancies.
The IRS and the Security Summit: Working Together
The IRS collaborates with state tax agencies and the tax industry through the Security Summit to safeguard taxpayer data. The IRS flagged over one million federal tax returns for identity theft in 2023 alone, prompting increased security measures:
- Enhanced Filters: The IRS now utilizes over 236 filters to detect fraudulent returns.
- Proactive Measures: Potentially fraudulent tax returns are held until taxpayer identity is verified.
Real-Life Examples: Understanding the Impact
Tax-related identity theft isn’t just a hypothetical threat. Here are some real-life scenarios:
- The Illinois Case: An Illinois man received a 29-month prison sentence for using stolen identities to file false tax returns and claim fraudulent refunds, causing a tax loss of over $221,000.
- The Austin Indictment: A federal grand jury indicted seven individuals for a conspiracy involving stolen identities to file fraudulent tax returns, claiming over $111 million in refunds.
Help is Available: Resources for Victims
If you are a victim of identity theft, the Taxpayer Advocate Service (TAS) can assist you. One anonymous taxpayer, despite filing her returns properly, faced identity theft that delayed her refunds. With TAS’s help, she resolved the issue and obtained necessary tax transcripts.
Empower Yourself This Tax Season
Tax-related identity theft is a growing concern, but by empowering yourself with knowledge and taking proactive steps, you can significantly reduce your risk. Stay informed, implement these safeguards, and navigate tax season with confidence. Remember, the IRS and resources like the Taxpayer Advocate Service are there to support you. By working together, we can combat tax-related identity theft and ensure a smoother tax season for everyone.
For additional information and resources, visit the IRS’s Taxpayer Guide to Identity Theft or contact the tax agency directly. Stay vigilant and protect your financial future!
