Identity Theft at Tax Time

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One of the fastest-growing problems for law enforcement related to identity theft is stolen tax refunds. The IRS more than doubled the level of employees dedicated to working identity theft cases between 2011 and 2012, with over 3,000 IRS employees working on identity theft issues. Despite these measures, however, the IRS reports an increasing number of identity theft cases. That’s because it is relatively easy for somebody to steal the tax refund that the IRS sends you. All they need is two pieces of information – your Social Security number and your address.

The IRS sends some refunds in the form of a prepaid debit card that has a pre-loaded balance, which makes it difficult to trace your refund if it gets into the wrong hands. If your tax refund is stolen, it can take at least six months or even up to a year for the authorities to sort things out and get your refund reimbursed to you.

Lots of People Know Your Social Security Number

While you may go to great lengths to carefully protect your Social Security number, it may still be in rather wide circulation. Here are just a few examples of people to whom you give free and voluntary access to your Social Security number:

  • Any employer who, at any time in your entire life, has requested it to process for tax withholding or to report your income after you provide them with an IRS Form W-9. Many Americans can’t even remember all the jobs they held, especially as a teen just entering the work force.
  • Tax preparers you hire to help you fill out your income tax forms at the end of the year. These folks are not, by the way, federally regulated. Almost anyone who has the time to learn about the tax code can attend classes and then go to work for companies such as H&R Block.
  • Any company such a stock brokerage firm or bank that has required your Social Security number in order for you to open an account or take out a loan.
  • Anyone who works in an office where your Social is archived. That could be a tax office, a doctor’s office, an attorney’s office, or the office where your mortgage is serviced.

Within the past year law enforcement officials have arrested people involved in tax refund theft rings such as mail carriers and technicians like those who come to your home to install cable and internet. In the case of the internet repair employees, they were gaining access to the internet used by those who already had their Social security number stolen. That allowed them to communicate with the IRS while making it look as though the form of communications, or emails, were coming from the person who legitimately lived at that particular address.

Precautionary Steps

  • You should always shred documents that contain your Social Security number unless you absolutely need them and monitor your credit files annually, if not more frequently, even if you have not been a victim to  identity theft. Every American can check their credit report for free once a year, or you can sign up for a free credit monitoring service.
  • The IRS encourages people to file electronically, which can speed up your refund. The faster you receive a refund, the less opportunity there is for someone to steal it. Similarly, experts suggest you should file as early as possible rather than waiting until the last minute because that also gives thieves a smaller window of opportunity, which reduces your risk. Do not, however, file electronically unless you are sure you have a secure and private Internet connection.
  • When mailing your tax returns, go to the post office in person and mail them instead of dropping them in a mailbox. It’s also a good idea to send them by certified mail with a return receipt requested to verify that they arrived on time and was signed for by someone at the IRS.
  • Should you be contacted by the IRS, don’t ignore them or procrastinate in hopes that the IRS will go away. The IRS is not going away, but if you cut off communication with them they will not be able to notify you if they suspect that someone is trying to use your identity in a fraudulent way.

Telltale Signs That Indicate Theft

  • If you received a notice from the IRS that more than one tax return for you was filed, beware. If the IRS finds two tax return claims, they will assume that you received more wages than you actually did, or that your state or federal benefits may be reduced or cancelled due to that “change” in income.
  • If a tax preparation professional or company tells you that they can get you a bigger tax refund than you are actually eligible for, there is probably something fishy going on and you should not believe them. You should also be wary of tax preparers that base their fees on a percentage of your refund or those that promise larger tax refunds over their competitors.
  • When contacted by the IRS by email, text or through social media treat it as a threat because the IRS never initiates contact that way. When the IRS needs information they inform you by sending a notification through the United States Postal Service by regular “snail” mail.

If You Have Already Been an Identity Theft Victim

If you have been victimized by identity theft of any kind, be sure to notify the IRS as soon as possible. Also, fill out the IRS Identity Theft Affidavit, Form 14039. The agency can issue a special PIN to you to add to your tax returns that adds an additional level of security, the same way that entering a password or answering a secret question does when you log on to a secure online portal. Unless thieves know that IRS PIN they will be thwarted in their attempts to steal your tax refund.

If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, or if you found questionable credit card activity, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245.

You should also put a fraud alert on your credit reports, advises the Federal Trade Commission.

In extreme cases, another option most Americans are not aware of is the issuance of a new Social Security number. The Social Security Administration has the power to issue a brand new Social, but only if absolutely necessary. They do that when someone is being harassed, abused, or is in grave danger when using the original number, or if they can prove that someone has stolen your number and is using it. You must provide evidence that the number is being misused and that the misuse is causing you significant continuing harm.

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