If someone has stolen your identity, there are several outcomes, and none of them are pretty. Identity theft can decimate your credit, empty your bank account, and rack up your bills — fast!
Not only that, but identity thieves also sometimes use their victims’ identities to file fraudulent returns and steal their refunds. In fact, according to the IRS, identity theft has become the most common form of tax fraud in the United States.
Keep reading to learn more about this growing problem, as well as some proven methods to protect yourself from identity thieves.
Scammers Use Your Identity to Steal Your Tax Refund
In most cases, identity thieves use phone or email scams to obtain their victims’ Social Security numbers (SSN). A criminal can do an enormous amount of damage with your SSN since it’s the turnkey to every aspect of your identity — including your financial accounts, employment record, online browsing and shopping history, and tax information.
Often, scammers use SSNs to file forged returns filled with falsified information. These scam artists will usually file as early as possible so they can beat their victims to the punch and steal their refunds via mail or direct deposit.
We know what you’re thinking: Doesn’t the IRS have my income on file? I can’t file a return with falsified income, so why can identity thieves get away with it? While it’s true the IRS has every taxpayer’s income on record, they don’t compare taxpayers’ returns with those records until several months after they issue refund checks. Then, they address discrepancies by initiating audits and adjustments (which don’t affect the scammers at all). This may seem like a faulty system, but otherwise, people would have to wait much longer for their annual refund checks.
Unfortunately, if a scam artist uses your identity to file a fraudulent return, it could take months or even years of hard work and cooperation with the IRS before you are able to resolve this issue and receive your legitimate refund (if you’re owed one at all). In 2013, the IRS’ treasury inspector general for tax administration released a report stating that the IRS took an average of 312 days to resolve tax-related theft cases closed between August 2011 and July 2012.
As the saying goes, an ounce of prevention is worth a pound of cure, so let’s examine a few methods for protecting your identity.
Protect Yourself From Fraudulent Tax Filings
The hard truth is that if a sophisticated and dedicated scam artist really wants your identity, they can probably find a way to get it. But that doesn’t mean you should make it easy for them. And by taking steps to help protect yourself, you can stop most thieves, who are usually lazy and would rather move on to an easier target.
Here are just a few suggestions on how to help protect tax returns from being stolen by identity thieves and maintain your anonymity in an increasingly conspicuous society.
Use Discretion When Giving Out Your SSN
Any business can ask for your Social Security number, but that doesn’t mean you have to give it to them. Unfortunately, the flip side to that coin is that they’re not required to do business with you if you’re unwilling to provide the information they want. In most instances, providing your SSN for your tax returns, health plan, or driver’s license is safe, but almost any transaction that involves a credit or background check will also likely require your Social Security number.
Whenever possible, ask if the company that wants your SSN offers an option to create a unique PIN or if a driver’s license is an acceptable alternative. And if it’s a product or service you don’t really need, it’s fine to say no and choose a competitor or alternative.
Report Any Suspicious Activities
The IRS deals almost exclusively in hard-copy mail. They rarely call individuals, and receiving an email from the IRS is even more rare. If someone claiming to be an IRS employee calls or emails you asking for payment or personal information, you should hang up and contact the authorities, even if the person seems knowledgeable or if your caller ID shows a number that appears to be a legitimate IRS representative.
According to the IRS’ website, they will never:
- Call to demand immediate payment or call about taxes owed without first having mailed you a bill.
- Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
- Require you to use a specific payment method like a prepaid debit card to pay your taxes.
- Ask for credit or debit card numbers over the phone.
- Threaten to bring in local police or other law enforcement groups to have you arrested for not paying.
If you do owe the IRS money and want to handle the issue without the help of an attorney, we suggest you initiate contact with the IRS by calling their direct line. Never use the call back number on your caller ID, as this could put you in direct contact with a scammer.
Follow Up After a Data Breach
Not all data breaches result in tax fraud or even identity theft. Just because a breach makes the news doesn’t necessarily mean you’re in danger. If you get word that your data may have been compromised, contact the company affected and the IRS to learn more about what sort of data has been stolen and the next steps toward resolution. And if you notice any suspicious charges to your bank account or credit card, or if there are major fluctuations in your credit score, contact the authorities immediately and place a hold on all your financial accounts.
File Early if Possible
The IRS stresses that taxpayers should file their taxes early whenever possible to minimize the threat of stolen returns. The earlier you file, the more control you have over your refund, and the less risk you face of having your tax account compromised.
However, you shouldn’t rush to file an incomplete return just to beat identity thieves to the punch. Incomplete or inaccurate returns can lead to severe delays, which could result in financial penalties and interest. Also, error-riddled returns tend to catch the eye of the IRS, which could lead to an audit. So file early if possible, but not at the expense of completeness or accuracy.
Contact S.H. Block Tax Services If You’ve Had Your Identity Stolen
At S.H. Block Tax Services, we take the integrity of your identity seriously. If you feel your identity has been stolen for the purposes of tax fraud, we will work hard to help resolve the issue with the IRS or the State of Maryland and get you the refund you deserve.
If you need help, please contact us today by completing this brief online form or by calling our offices at (410) 793-1231. We have earned an A+ rating with the Better Business Bureau, and we offer free initial consultations so we can diagnose your tax issues and begin developing solutions at no cost to you.
Please note that statutes of limitations apply to many tax-related situations, so get in touch with us today to take the first step toward resolving your tax problems.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject. Please read our full disclaimer here.
Harrington, A., Holtfreter, R., & McLeod, T. (2014, March). Identity theft and tax refund fraud. Fraud Magazine. Retrieved from http://www.fraud-magazine.com/article.aspx?id=4294982014
Scam phone calls continue; IRS identifies five easy ways to spot suspicious calls. (2014, August 28). IRS.gov. Retrieved from https://www.irs.gov/newsroom/scam-phone-calls-continue-irs-identifies-five-easy-ways-to-spot-suspicious-calls