Hyden, Miron & Foster, PLLC Law Blog

Friday, October 30, 2015

Tax-Related Identity Theft

Tax-related identity theft can occur in two ways: 1) when thieves file a fake return under the victim’s social security number in order to receive a refund check; and 2) when thieves use stolen information to obtain employment, which makes it seem like the victim had more income than he or she actually earned. Tax-related identity theft is increasing at an alarming rate. In the IRS’s fiscal year for 2014, the IRS assigned more than 3,000 employees to work on identity theft cases. This assignment reduced the number of employees available to handle the IRS’s traditional workload.

How do I know if I am a victim of identity theft?

There are several indicators that you are a victim of identity theft. The main indicator is that you tried to file your tax return electronically, but the return is rejected because another return using your social security number has already been filed.

Other indicators include notices from the IRS regarding the following:

  • stating that you have wages from somewhere you have never worked; or
  • stating you have a balance due, refund offset notice, or have collection actions taking against you for a tax year when you didn’t file a return or receive a refund.

What do I need to do if I am a victim of identity theft?

If you are the victim of identity theft and a fraudulent tax return has been filed in your name, the process of filing your taxes and collecting a refund may be more lengthy and difficult. Identity theft victims have to wait at least six months to have their refunds restored. However, reduced IRS funding and staff levels could result in victims waiting even longer this year.

If someone has filed a false tax return under your social security number you need to do the following:

  • complete Form 14039 Identity Theft Affidavit;
  • print a paper copy of your tax return;
  • make a photocopy of at least one document to verify your identity (passport, driver’s license, Social Security card, or other valid federal or state government issued identification); and
  • mail your tax return, Form 14039 and photocopy of the document used to verify your identity to the IRS (using the appropriate address for your state).

If the IRS notifies you that you did not report all of your income on your tax return you will need to:

  • respond to the letter as soon as possible (explaining that you did not work at that business and that you believe you are a victim of identity theft);
  • complete Form 14039 Identity Theft Affidavit;
  • make a photocopy of at least one document to verify your identity (passport, driver’s license, Social Security card, or other valid federal or state government issued identification); and
  • mail your response, Form 14039 and photocopy of the document used to verify your identity to the IRS (using the appropriate address indicated on the IRS correspondence).

You can also contact the IRS’s Identity Protection Specialized Unit at 1 (800) 908-4490.

If you are a victim of identity theft the Federal Trade Commission recommends that you also take the following steps:

  • Report identity theft to the Federal Trade Commission at www.identitytheft.gov or the Federal Trade Commission Identity Theft Hotline at 1 (800) 438-4338.
  • Contact one of the major credit bureaus to place a fraud alert on your records

 

Credit Bureau Website

Phone Number

www.equifax.com

(800)525-6285

www.experian.com

(888) 397-3742

www.TransUnion.com

(800) 680-7289

 

What precautionary measures can I take to lessen the risk of identity theft?

The IRS recommends the following things that individuals can do to lessen the risk of identity theft:

  • check your credit report annually;
  • check your Social Security Administration earnings statement annually;
  • protect your personal computers by using anti-spam and anti-virus software and by using firewalls;
  • don’t routinely carry your Social Security card; and
  • don’t give a business your Social Security Number just because they ask for it. Only give your Social Security Number when it is absolutely necessary.

 

The IRS also recommends that you do not give personal information over the phone, through the mail or via the Internet unless you are the one who has initiated the contact or you are sure that you know to whom you are sending the information.

What is the IRS doing to combat tax related identity theft?

According to the IRS Global Identity Theft Report issued May 31, 2014, the IRS was able to stop more than 3.6 million returns filed by identity thieved in the 2014 filing season.

For the 2015 filing season the IRS has limited the number of direct deposit refunds to a single financial account or to three pre-paid debit cards. This will also stop tax preparers who improperly deposit client refunds into their own accounts.

The IRS has also created an Identity Protection Pin (IP PIN) that is assigned to victims of identity theft. Each year the victim receives a new IP PIN that is used to file their income tax return.

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