Tax Identity Theft

Published in The Valley News March 9, 2017
In the electronic age, we are all accustomed to being on alert for signs of identity theft which impacts our credit.  But do you know what to do if you are the victim of identity theft relating to your taxes?  Bad Guys are increasingly using stolen Social Security Numbers to file fraudulent tax returns and claim bogus refunds. 

In 2015 IRS stopped 1.4 million confirmed identity theft returns totaling $8 billion and rejected or suspended processing of an additional 4.8 million suspicious returns.  The U.S. General Accounting Office has called on IRS to do more to protect taxpayers from tax identity theft. 

How does tax identity theft impact you?  Often you are unaware that your information has been hijacked until you attempt to file your tax return.  If you are filing electronically, your return will be rejected with a message stating that a return has already been filed under your social security number.  This will halt any refund you may be due until the issue is resolved.  You might also receive a letter from IRS requesting additional taxes for income that is attributed to your SSN, but which was not yours.

If you discover one of these circumstances, you should contact IRS immediately. You will need to complete Form 14039 Identity Theft Affidavit. They will then assign an agent from the Identity Theft Victim Assistance Unit to your case.  They will work with you to get the situation resolved to free up your refund.  Once you are verified as the rightful taxpayer, you will be assigned a unique Identity Protection PIN to use in filing your return in the future.  This number will change annually.

After you determine that you are the victim of tax identity theft, it is likely that your identity has been compromised in other ways.  You should take the same steps you would take in case of credit identity theft.  Notify credit agencies to put a fraud alert on your credit report and alert your bank.  You can also file a complaint with the Federal Trade Commission at identitytheft.gov.  Conversely, if you become the victim of credit identity theft, remember to notify IRS as well to prevent also being victimized through the tax system.

IRS recommends several precautions to protect your private information.  Always use security software on your computer and establish strong passwords.  Beware of phishing schemes, do not click on links in unknown emails and protect your data.  Keep Social Security cards and tax records in a secure place.

Identity theft is a serious crime. Victims’ lives can be disrupted and the financial impact can be severe.  If your tax return is impacted, your refund can be tied up for an extended period.  Remaining vigilant, watching for signs of identity theft and taking immediate action when something arises will keep the Bad Guys at bay!