Fast Facts on Tax-related Identity Theft

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One of the reasons someone would steal your Social Security Number (SSN) is to file a tax return claiming a refund in your name. Tax-related identity theft is more common than you may imagine, and has only risen dramatically in recent years. The IRS, which has been proactive in educating and cautioning on ID theft, has been forced to step up its game in the light of a high incidence of such fraudulent claims. In a more recent incident, cybercriminals stole over $30 million in federal refunds after hacking an IRS website and accessing taxpayer information.

The victim is often the last to know

Most of the time, you may not even know that you’re a victim of identity theft. The IRS may be the first to break the news to you after you file your taxes. You may only realize it after you file your return later during the filing season and find out that two returns have been filed using the same SSN. Another indicator of identity theft is a letter/notice from the IRS stating that you owe additional taxes, have collection actions for a year in which you didn’t file a tax return, or you have a refund offset (the U.S Treasury may lower your federal tax refund to pay towards any federal/state debts you owe). A third indicator is when IRS records show that you were paid wages from an employer unknown to you.

Steps to reduce risk of ID theft

  1. Avoid unnecessarily carrying your Social Security Card or documents with your SSN on them.
  2. Give your SSN to a business only when it is necessary.
  3. Get in the habit of checking your credit report and Social Security Administration earnings statement every year without fail.
  4. Take the necessary precautions (anti-virus software, anti-spam, encryption, a good firewall, strong passwords, etc) to secure your personal information on your home computer(s).
  5. Never share your personal information over the phone, internet or mail unless you’re absolutely sure of who is asking and why.
  6. The IRS does not contact taxpayers and request their personal or financial information. If you get a call demanding payment or stating that you owe taxes even before you have received a bill, from someone claiming to be the IRS, report the matter to the Treasury Inspector General for Tax Administration at 1-800-366-4484.

What to do if you are a victim of tax-related identity theft

 

It is critical that you take quick action after discovering that your personally identifiable information (PII) has been stolen. Here’s a step-by-step action plan:

  1. File a report with the local police.
  2. File a complaint with the Federal Trade Commission or FTC Identity Theft Hotline at 1-877-438-4338
  3. Get in touch with one of the big three credit bureaus – TransUnion, Experian or Equifax – and have a fraud alert placed on your credit records.
  4. Respond to any IRS notice without delay.
  5. Complete and send IRS Form 1409, Identity Theft Affidavit.
  6. Continue paying your taxes and filing your returns

What the IRS is doing to safeguard against identity theft

 

In an effort to curb the growing menace of tax-related identity theft, the IRS is planning to embark on a public-private information sharing initiative. The agency has announced that it will monitor the transmission of tax returns to look for repetitive use of Internet Protocol numbers and the electronic address from where the return is originating. Other strategies include analyzing computer device identification data tied to the return’s origin, understanding the time taken to complete a tax return to identify authentic filing versus mechanized fraud, and capturing metadata from computer transactions to investigate any fraud linked to identity theft.

Have you been a victim of a data breach? Tell us your story and we’ll post it on our blog. Otherwise, if you have and you want to ask some questions about protecting your identity we can put you in touch with a few amazing companies.

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