Protecting Yourself Against Tax Identity Theft
Every year, tax season gives way to a fresh wave of identity theft-related crimes that affect millions of Americans. In 2015, the U.S. Federal Trade Commission tracked a whopping 47% increase in identity theft complaints. Tax refund fraud was a major contributor to this spike, with FTC Chairwoman Edith Ramirez naming tax refund fraud as the “largest and fastest growing ID theft category” tracked by the commission.
Tax-related identity theft crimes involve thieves using stolen Social Security numbers to file tax returns and cash in on refunds. Tax identity theft victims usually discover the crime when their returns are rejected because scammers have already filed. It’s important to note that even those who are not required to file a return can also fall victim to return fraud. Similarly, even if you’re not owed a refund from the IRS, you are also at risk for these crimes.
Although the IRS reported that their public-private partnership crackdown efforts have helped prevent millions of dollars in fraudulent reports in 2016, there are steps that individuals should take to help reduce the likelihood of tax identity theft:
- File early: The best way to avoid falling victim to tax identity fraud is filing your state and federal taxes as soon as filing season begins. This usually falls on the second or third week in January.
- Watch out for tax documents in the mail: Usually, employers and banks will send hard copies of tax documents in the mail, noting “tax documents enclosed” on the envelope. This is an easy target for identity thieves, but can be avoided by having your mail delivered to a mailbox that locks, a P.O. box, or by simply checking your mail frequently.
- Safeguard your Social Security number: Any vulnerability to your SSN can result in fraudulent tax crime. Some best practices for protecting your SSN are shredding documents that include the number, only sharing on secure documents when required, and keeping your Social Security card in a safe place. If you believe your SSN is at risk, there are monitoring services available that will alert you if a fraudulent name or address has used it.
- Beware of phishing scams: The IRS saw a 400% increase in phishing and malware incidents in the 2016 tax season. These scams, conducted via email or telephone, are disguised as official communications from the IRS, tax software companies, and other tax companies. The scammers ask for personally identifiable information like SSNs. The IRS does not initiate contact with taxpayers by email, text messages, or social media to request personal or financial information. If you encounter a phishing scam, report it to the IRS.
- Request a free copy of your credit report annually: Consumers are legally entitled to a free copy of their credit report from each of the major bureaus every year, which include Experian, Equifax, and TransUnion. Proactively disputing unauthorized or suspicious activity is one way to get ahead of potential identity theft. The three national credit reporting companies created a central location for ordering credit reports, which you can do by visiting com or by calling 1-877-322-8228.
- Data breaches and your taxes: If you’ve fallen victim to a data breach where your SSN was compromised, it’s likely that this information could be used to file a fraudulent tax return. The FTC recommends that data breach victims notify one of the three major credit bureaus to place a free fraud alert on credit files. Another recommended step is a credit freeze, which prevents access to credit records. In some cases, the IRS may contact breach victims to inform them of tax-related identity theft or if an e-file tax return was rejected as a duplicate. In these instances, submit IRS Form 14039 (see below), and continue to file your tax return.
Victims of tax-related identity theft should respond immediately to notices from the IRS that indicate fraudulent tax activity. You can contact the IRS Identity Protection Specialized Unit to report fraud at 1-800-908-4490. It’s also worth filing a police report or an IRS ID Theft Affidavit Form 14039, along with proof of your identity like your Social Security card. Record the dates you made calls and keep any copies of letters you sent, along with all tax documents and IRS notices.
Proactivity is key when combating any instance of identity theft. If you’ve experienced tax identity theft and want to share any lessons learned, join the conversation on Facebook, Twitter, and LinkedIn.
The IRS experienced a breach that is changing the way businesses and consumers think about personal information. Reporters attribute the IRS breach to a crime syndicate in Russia, who used personal information obtained elsewhere to exploit the Get Transcript feature on the IRS website. They successfully exploited 104,000 individuals and filed nearly $50 million in fraudulent tax funds.
As we approach the 2014 tax filing deadline, many taxpayers gearing up to file their taxes may find that someone else has already fraudulently filed for them – and have cashed in their refund check. During the 2013 tax filing period, $5.8 billion was paid in identity theft refund costs, according to the U.S. Accountability Office 
On January 31, the IRS will start processing income tax returns. This day also marks the beginning of one of the busiest times of year for identity thieves looking to cash in by filing false returns.