Wednesday, May 31, 2023

Tax Refund Identity Theft: What You Need to Know

As another year comes to an end and we prepare our tax returns, the IRS and other government officials are preparing for an increase in tax refund identity theft. In 2011, the IRS missed over 1.1 million fraudulent tax returns and paid out over $3.6 billion in fraudulent tax refunds. Fortunately, this year they’re taking more precautions to protect taxpayer identities. Even with these precautions, it’s important for you to know how to protect yourself from becoming another victim of tax refund identity theft.

How to Know if Your Tax Return or Records Have Been Affected

Identity thieves file fraudulent tax returns using legitimate taxpayers’ information. They file a fake tax return on your behalf, collect the refund, and repeat the process with another taxpayer. They often do this early in the tax season–before you are likely to file yours–so you’re often unaware a fraudulent tax return was even submitted in your name until much later.

Taxpayers only discover they’re victims of tax refund identity theft when they attempt to file a legitimate return. The IRS will reject the tax return and typically sends a notification stating that:

• More than one tax return has already been filed

• There is a balance due or collection actions have been taken for unfiled tax returns

• The IRS has realized you’ve received wages from employers that you don’t know

If you receive any notification from the IRS, you must respond immediately. You will be required to fill out IRS Form 14039 if you believe you’re the victim of tax refund identity theft.

Tips for Protecting Yourself From Tax Fraud

There are many things you can do to prevent identity theft when you submit this year’s tax return. While you should always protect your personal information, you should also:

• Sign-up with ID Theft Solutions, the only identity theft protection company managed by law enforcement that restores your identity back to pre-theft status.

• Never carry your Social Security card with you or any documents that have your Social Security number on it. If your purse/wallet is lost or stolen, a thief can easily gain access to your identity.

• Never give out your Social Security number just because someone requests it–especially a supposed phone call from a government official. The IRS will never initiate contact with you via the phone, so you are probably speaking with someone who is trying to commit tax refund identity theft. If you have any questions about the status of your tax return, hang up and call the IRS directly.

• Lock up or shred documents containing personal information or financial data.

• Review your credit report from each of the three major credit bureaus at least once a year for any fraudulent activity.

• Use firewalls, anti-virus software, and regularly update your computer’s security patches to avoid giving identity thieves access to your information via the Internet.

• Never give out personal information over email, the phone, or through snail-mail without verifying the sender.

Lastly, always keep your eye on the news for any new consumer reports regarding tax fraud or tax refund identity theft scams that could affect you. The IRS and news outlets often publish examples of fake emails and phone calls scammers use to impersonate IRS officials.