Tax identity theft is when someone illegally uses your social security number (SSN) to file a fraudulent tax return in your name. Thieves do this in order to steal money from the United States Treasury in the form of a tax refund on your behalf. These are typically not individual thieves, rather organized criminal enterprises that cost taxpayers billions of dollars each year. The Federal Trade Commission receives the most complaints about tax identity theft. Protect yourself from becoming a victim.
Knowing the signs of identity theft is important to all taxpayers as anyone can be a target. Typically, people do not realize that they are a victim until they file their own tax return. This happens because only one tax return can be filed per individual each year. Thieves know this, so they file fraudulent returns as early into the tax season as possible to beat you to the punch. As a result, victims receive letters in the mail from the IRS, explaining to them they have already received their tax return. Receiving this letter is the first and most common red flag that you are a victim of tax identity theft. Receiving unrequested tax transcripts in the mail and not being able to file electronically due to duplicate SSNs are other indicators. If any of these red flags come up, it is highly advisable that you visit the IRS website as they provide directions for exactly what to do based on your situation. This will likely include requesting a copy of the fraudulent return as well as notifying the IRS by filing an IRS Form 14039 Identity Theft Affidavit at the very least.
Like most crimes, preventing tax identity theft from occurring in the first place is easier than and preferable to resolving it. Fortunately, there is plenty that taxpayers can do to reduce the likelihood of becoming a victim. The first step you can take is to obtain an Identity Protection PIN from the IRS. This PIN is a six-digit number that is required in order to file your individual tax return electronically. Having this extra line of security can prevent thieves, who have all the other necessary information, from filing a fraudulent return. This PIN can be acquired easily through the IRS website and, considering over 90 percent of individual tax returns are e-filed, is beneficial to almost all taxpayers. Another preventative measure you can take is being mindful of and protecting your personal information. Documents such as W-2s, prior tax returns, bank statements, and social security income statements are all likely to contain your social security number. Shredding extra and unnecessary copies, as well as storing necessary copies in a safe place, will make it more difficult for thieves to obtain your social security number. This is because your sensitive information is not as easily available anywhere else as is it on a clearly marked and fully intact document sitting in a trash bag. Thieves know a lot of people are careless with their personal documents, so they often go through dumpsters to find their next victims. Finally, filing your tax return as early as possible is another way to reduce the chances of having a fraudulent tax return filed in your name. As previously touched upon, the criminals will file fraudulent tax returns as early as they can, as the IRS will only accept one. Filing early will protect yourself from tax identity theft for the rest of the tax period, as well as alert you sooner if you have already been victimized.
Finally, we would be reminisced not to emphasize that the IRS only initiates contact with taxpayers through one source, the mail. If the IRS needs to reach out to you, for any reason, they will only do it the old fashion way, via the United States Postal Service. The IRS will never contact with you via text, email, social media, or any other unmentioned forms of communication media. Thieves often use phishing scams via text messages to steal taxpayer information, so it is important to remember the IRS will never contact you by text. If you receive a message on your phone, likely regarding a refund, claiming to be from the IRS, it is a scam. Avoid opening the message, as it may contain malicious links used to steal private information. You can report all suspicious texts or emails to email@example.com.