Identity theft is one of the fastest growing crimes nationwide, and tax refund fraud caused by identity theft is a major challenge facing taxpayers. According to a Government Accountability Office report, fraudulent tax refunds were estimated at $5.2 billion for the 2013 tax filing season.
David Lastowski, CPA, a member of the Pennsylvania Institute of Certified Public Accountants, offers the following advice to help you guard against tax return identity theft.
What Is Tax Return ID Theft?
“Tax return identity theft occurs when a taxpayer’s name and Social Security number is used by an identity thief to fraudulently file a tax return and claim a refund,” says Lastowski, a sole practitioner in Erie, Pa.
According the Internal Revenue Service, the problem of tax return identity theft is significant. From 2011 to October 2014, the IRS identity theft project has stopped 19 million suspicious returns and protected over $63 billion in fraudulent refunds.
“There is no class of taxpayers that is immune to tax return identity theft,” says Lastowski. “Young, old, high-income, and low-income taxpayers have all been victims. Taxpayers are unaware that they are victims of tax return identify theft until their refunds are delayed or they are notified by the IRS that two returns have been filed under their Social Security number.”
Red flags
Be alert to possible tax-related identity theft if you receive an IRS notice or letter that states any of the following:
•More than one tax return for you was filed.
•You have a balance due, refund offset, or have had collection actions taken against you for a year you did not file a tax return.
•IRS records indicate wages received from an unknown employer.
Be proactive
The IRS recommends that you take the following steps to protect your tax and financial information:
•Don’t carry your Social Security card or any documents that include your Social Security number or Individual Taxpayer Identification Number.
•Don’t give personal information over the phone, via the mail, or on the Internet unless you have initiated the contact or know exactly who you are dealing with.
•Check your credit report at least once every 12 months.
•Secure personal and financial information.
•Use firewalls and anti-spam/virus software, update security patches, and periodically change passwords for Internet accounts on your personal computer.
Victim response
If you become a victim of identity theft, the IRS recommends that you do the following right away:
•Contact the IRS Identity Protection Specialized Unit at (800) 908-4490, ext. 245, so steps can be taken to secure your tax account.
•Report identity theft incidents to the Federal Trade Commission (FTC) at consumer.ftc.gov or the FTC Identity Theft Hotline at (877) 438-4338.
•File a report with the local police.
•Contact the fraud departments of the three major credit bureaus: Equifax, equifax.com, (800) 525-6285; Experian, experian.com, (888) 397-3742; and TransUnion, transunion.com, (800) 680-7289.
•Close any accounts that have been tampered with or opened fraudulently.
The IRS does not initiate contact with taxpayers by e-mail or phone to request personal or financial information. This also includes any type of electronic communication, such as text messages and social media channels.
Turn to your local CPA
Your local CPA can help you understand your money management issues. Be sure to contact him or her with all of your financial questions and concerns.
If you don’t have a CPA, you can find one by location or area of expertise at www.ineedacpa.org.
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