What is it identity theft tax fraud?
Tax refund fraud is the use of a stolen identity to steal money from the United States treasury by filing fake tax returns that claim refunds. Stolen identity refund fraud has become a national epidemic. In 2014, the Federal Trade Commission (FTC) reported that tax refund fraud was the number one consumer complaint for the misuse of an identity theft victim’s information. Tax fraud went from 4.8 percent of overall consumer complaints in 2005 to a sky-rocketing 34.8 percent in 2014.
How is it committed?
To commit tax fraud, all a criminal needs is your name, social security number, your date of birth, and a falsified W2 to file a tax return and attempt to claim a refund. This information is relatively easy for thieves to obtain. There are weekly reports from large companies of breaches of electronically stored personal data. But, a thief does not need to be a computer whiz to steal your identity. For example, your personal information can be stolen by an employee at your doctor’s office looking in your records, or by someone calling you and pretending they work for the IRS, or by someone simply snatching W2’s right out of mailboxes.
What to do if you are a victim.
Oftentimes people have no idea their personal information has been compromised or used fraudulently until they file their tax return and it is rejected by the IRS. The true tax return gets rejected because the IRS believes the taxpayer has already filed a return. Upon learning that you are a victim of stolen identity tax refund fraud, there are several steps that must be taken. The fraud victim must file a paper tax return along with a signed Identity Theft Affidavit (IRS Form 14039) and a photocopy of their driver’s license, passport or state issued I.D.
After mailing the real return with the supporting documentation, the fraud victim must also do the following:
- Notify the IRS Identity Protection Specialized Unit at (800) 908-4490.
- Contact the Federal Trade Commission or (877) 438-4338 – they will provide a reference number for the case.
- Notify your local police department – they will provide a police report number.
- Call the IRS back and give them the FTC reference number and the police report number.
- Notify all financial institutions (bank accounts, retirement accounts) that you are a victim of identity theft tax fraud.
- Notify the Social Security Administration that you are a victim of identity theft tax fraud.
- Get an IRS secure filing PIN, which you will need to use for the next three years when filing your return. The IRS will send you a new PIN each January to use when filing the previous year’s return.
- Contact the three major credit bureaus and place a 90 day fraud alert on your social security number. You can also place a credit freeze on your social security number. Notifying one bureau will trigger the alert for all three.
- Transunion www.TransUnion.com (800) 680-7289
- Equifax www.Equifax.com (800) 525-6285
- Experian www.Experian.com (888) 397-3742
While the IRS is working to streamline identity theft case resolution to help innocent taxpayers, the reality is these cases are complex and can take months to resolve. Taxpayers are likely to see their refunds delayed for 120 to 180 days while the IRS researches and resolves the matter. During the investigative period, victims still need to continue to file their tax returns.
The IRS may contact you by U.S. mail to notify you of duplicate returns or unreported wages. It is important to note that the IRS will only make initial contact with a taxpayer via the U.S. mail. They will never use email, text, or a social media message. If you receive an email from the IRS asking for personal or financial information, do not reply or clink any links. Instead forward the email to firstname.lastname@example.org.
How to protect yourself from becoming a victim.
Don’t become a victim of tax refund fraud. Steps can be taken to minimize the chances that your identity will be stolen and fraudulently used to file a tax return. Experts recommend taking the following safeguards to avoid becoming a victim of identity theft or tax fraud:
- Never carry your social security card and/or number in your purse or wallet
- Minimize the amount of information you carry in a purse or wallet
- Don’t give out your social security number to any person or business unless it is absolutely necessary
- Never give out personal information over the phone, through email or the internet
- Check your credit report annually using www.annualcreditreport.com or (877) 322-8228
- Check your Social Security Administration earnings statement annually
- Review bank and credit card statements carefully
- Reduce the number of preapproved credit card offers you receive by calling 800-5OPT-OUT
- Strengthen passwords – minimum 8 characters with both alpha and numeric symbols and upper and lower case
- Make sure your home computer firewall protection and your anti-virus software is up-to-date
- File electronic returns only through secure connections; never use an IRS link provided in an email
- Mail paper returns at the post office or other secure carrier, never leave in a mailbox with the flag up