Taxpayer identity theft continues to increase in the United States. In 2012, there were 1.8 million incidents of identity theft and fraudulent tax refunds, creating a $5 billion problem, according to the U.S. Treasury Inspector General for Tax Administration. In the first half of 2013, the number of tax-related identity thefts had already surpassed the 2012 number.
Tax-related identity theft occurs when someone intentionally uses the personal information of another person to file a false tax return with the intention of obtaining an unauthorized refund. Victims are left dealing with the aftermath, which can be emotionally draining as they work for years to untangle the financial nightmare. Taxpayers should know how to protect themselves and what to do if they become a victim, say the experts at the Pennsylvania Institute of Certified Public Accountants.
Spotting taxpayer identity theft
Usually an identity thief uses a legitimate taxpayer’s identity to file a false tax return. The typical method is to use a stolen Social Security number early in the filing season to file a forged return and attempt to collect a fraudulent refund. Taxpayers may be unaware this has even happened until they try to file their legitimate return later in the filing season and receive a message that a return has already been filed with that SSN.
Protect your information
The IRS offers the following tips to minimize the chance you’ll become a victim:
•The IRS will never initiate contact with taxpayers by e-mail or social media to request personal or financial information. The IRS does not send e-mails stating that you are being electronically audited or that you are getting a refund. This includes other types of electronic communication, such as text messages and social media.
•If you receive a scam e-mail claiming to be from the IRS, forward it to them at phishing@irs.gov.
•Identity thieves access your personal information by many different means:
•Stealing your wallet or purse.
•Posing as someone who needs your personal information through an unsolicited phone call, e-mail, or mailing.
•Looking through your trash for personal information.
•Accessing information you provide to an unsecured Internet site.
•If you discover a website that claims to be the IRS but does not begin with “www.irs.gov,” forward that link to the IRS at phishing@irs.gov. To learn how to identify a secure website, visit the Federal Trade Commission’s website.
•If your SSN is stolen, another individual may use it to get a job. That person’s employer may report income earned by him or her to the IRS using your SSN, making it appear you did not report all of your income on your tax return. If this occurs, contact the IRS to show the income is not yours. After the IRS authenticates who you are, your tax record will be updated to reflect only your information. The IRS will use this information to minimize future occurrences.
•Your identity may have been stolen if a letter from the IRS indicates more than one tax return was filed for you, or the letter states you received wages from an employer you don’t know. If you receive such a letter from the IRS, leading you to believe your identity has been stolen, respond immediately to the name, address, and phone number on the IRS notice. If you believe the notice is not from the IRS, contact the IRS to determine if the letter is a legitimate IRS notice.
•If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet or questionable credit card activity or credit report, you need to provide the IRS with proof of your identity. Submit a copy of your valid government-issued identification—such as a Social Security card, driver’s license, or passport—along with a copy of a police report and/or a completed IRS Form 14039, Identity Theft Affidavit, by faxing to the IRS at (855) 807-5720. You can also contact the IRS Identity Protection Specialized Unit at (800) 908-4490. You should also follow the FTC’s guidance on the proper procedure for reporting ID theft at https://www.consumer.ftc.gov/features/feature-0014-identity-theft.
•Show your Social Security card to your employer when you start a job or to your financial institution for tax reporting purposes. Do not routinely carry your card or other documents that display your SSN, and don’t give out your SSN because someone asks for it.
•When filing your electronic tax return, use a strong password to protect the data file. Once your return has been e-filed, save the file to a CD or flash drive and then delete the personal return information from your hard drive. Store the CD or flash drive in a safe place, such as a lock box or safe.
Call the IRS Tax Fraud Referral Hot Line at (800) 829-0433 if you suspect someone is misusing your information to commit tax fraud. You also may submit Form 3949A (Information Referral) to report potential tax law violations to the IRS. If you have information about the identity thief who affected your personal information negatively, file an online complaint with the Internet Crime Complaint Center at https://www.ic3.gov.
Additional safety measures
•Check your credit report every 12 months. The Fair Credit Reporting Act requires each of the nationwide credit reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request once every 12 months. This will help you monitor any changes or unusual activity. (It is recommended that you stagger these requests for a free report every four months.) The FTC (https://www.consumer.ftc.gov/articles/0155-free-credit-reports) provides information on how to contact each credit agency.
•Safeguard personal information. Protect personal computers by using firewalls, anti-spam/anti-virus software, update security patches, and change passwords for Internet accounts.
•Shred all documents with any personal identifying information.
•Don’t give personal information via the phone, mail, or Internet unless you have initiated the contact or are sure you know who you are dealing with.
A CPA can help
Whether or not you’ve been a victim of taxpayer identity theft, a CPA can help you analyze your current situation and determine the best course of action for the coming year. If you have questions about your taxes and personal financial planning, talk with your financial advisor. To find a CPA in Pennsylvania by location or area of expertise, visit www.ineedacpa.org.
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