Published on: March 21, 2019
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The process of filing taxes every year takes plenty of time and effort even if everything goes perfectly. Add to that the worry about tax return identity theft, and your stress levels are bound to skyrocket. Knowing the signs to watch out for and keeping a close watch on the status of your tax return can help you stay safe and minimize risks of falling victim to scammers.
If someone gets access to your Social Security number (SSN) and uses it to file a tax return with fraudulent claims, this is known as tax return identity theft. Victims often won’t even know they’ve been targeted until they e-file a return and are informed that their tax return has already been submitted! In some instances, you might get Letter 5071C from the IRS, saying that they have received a suspicious tax return with your name and SSN, and they need to verify your identity to process the return accurately. The letter includes quick and secure steps for you to verify your identity.
There are no specific early warning signs that you are a target of tax return identity theft. However, if you know that your SSN has been compromised or suspect that this is the case, then you should assume that this information might be used to commit tax return fraud. If this happens, it is likely that the IRS will get in touch with you about:
Filing your tax return early on can be a deterrent to prospective fraudsters. If you file first and a scammer files later using your personal information, their return will be rejected for being a duplicate filing. This effectively minimizes the chance of you falling victim to a tax fraud scheme.
One common ruse that a lot of people fall for are email links claiming to be from the IRS, which are actually sent with malicious intent by would-be identity thieves. Remember that the IRS sends notices by mail and does not seek your financial or personal information through texts, emails, or social media platforms. While there is no limit to the ingenuity and planning that criminals can go to in order to steal your personal information to commit tax fraud, there are some common scams to watch out for. These include phishing, hoax phone calls, fake charities, schemes pretending to help victims of natural disasters, and impersonation, such as claiming to be from the Taxpayer Advocacy Panel or bankers.
Some specific steps you can take to stay safe are:
If your personal information was compromised as a result of a data breach, then you should try to find out what type of personal information was stolen. Not all breaches result in tax-related identity fraud.
Tax fraud is more likely if someone gets access to your SSN—as opposed to other types of identity theft, such as credit card fraud. If you have confirmed that you are a victim of tax return identity theft or strongly suspect this, it is imperative that you act immediately.
The IRS also encourages you to report any suspicious online or email phishing scams to email@example.com. You can call the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 to report phishing and other scams initiated by phone, mail, or fax. If your identity has been compromised due to a stolen purse, wallet, questionable credit card activity or a credit report, contact the IRS Identity Protection Specialized Unit at 1-800-908-4490. Besides taking up the matter with the IRS and following their process in such matters, you must do the following:
The IRS states that most cases will be handled in under 120 days, with some taking as long as 180. A Treasury Inspector General for Tax Administration report from 2016 found that victims of ID theft were waiting an average of 166 days for their account to be resolved.
The resolution of your identity theft case is contingent upon the number of cases pending before the IRS and the complexity of your individual case. Your case will be handled by the Identity Theft Victim Assistance Headquarters, which is staffed by personnel with specialized training to handle such cases.
Since the IRS distributes about $300 billion in refunds, unscrupulous people see this money as a lucrative target. Once you contact the IRS about the identity theft or possibility of theft, they will advise you on how to proceed. A tax professional can also help you out with the process involved in handling this issue.
You will need to prove your identity with the help of documentation such as your SSN card, driver’s license or passport. Once the IRS confirms that you are a victim of identity theft, you might be issued a unique, six-digit number called the Identity Protection Personal Identification Number or IP PIN. Following this, you will get a new IP PIN from the IRS every year so as to enable you to file your return without any hitch. While the IRS website states that most cases are resolved within 120 days, there are no guarantees, and it can take up to 180 days or more in certain cases.
While the IRS, in collaboration with the state agencies and the tax industry, has put in place many safeguards to fight tax identity theft, it is still not foolproof. Statistics show that instances of tax- related identity theft is on the decline with such reports to the IRS falling by a significant 40% in 2017, as compared to the previous year. This is definitely a good sign, and by staying informed about possible pitfalls and taking precautions, you can help the IRS improve these figures.