Identity theft places a burden on its victims and presents a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.
Identity thieves often use a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. However, many individuals who are identity theft victims are unaware that their identities have been stolen to file fraudulent tax returns. It is not until legitimate taxpayers file returns resulting in duplicate filings under the same names and Social Security numbers that they realize they are victims of identity theft. While the IRS is working to address the issue, affected taxpayers experience delays, often significant, in any refunds owed them.
The IRS continues to expand the number of ID theft filters it uses to identify potentially fraudulent tax returns and prevent the issuance of fraudulent tax refunds. According to a Government Accountability Office report, the IRS prevented the issuance of approximately $24.2 billion in fraudulent tax refunds as a result of ID theft filters for the 2013 tax filing season.
The identity theft filters incorporate criteria based on characteristics of confirmed ID theft tax returns, including amounts claimed for income and withholding, filing requirements, prisoner status, taxpayer age and filing history. Tactics also include filters, such as clustering techniques, to target multiple refunds, particularly those refunds that are scheduled to be deposited into a single account or mailed to a single address. Tax returns identified by these filters are held during processing until the IRS can verify the taxpayer’s identity. The IRS attempts to contact the individual who filed the tax return, and if this individual’s identity cannot be confirmed the IRS removes the tax return from processing.
IRS Account Flags
If you are an actual or potential victim of identity theft and would like the IRS to mark your account to identify questionable activity, file an Identity Theft Affidavit (Form 14039) with the IRS. The IRS has also issued to those taxpayers who have been identified as victims an Identity Protection PIN (IP PIN) for use when filing their federal tax returns that shows that a particular taxpayer is the rightful filer of the return. Returns filed with the IP PIN will be processed as a legitimate return with no delays.
You and/or your clients should also be alert to possible tax-related identity theft upon receiving 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.
Should you or your clients receive any of the above notices or believe there has been ID theft, contact the IRS Identity Protection Specialized Unit immediately at 800-908-4490 x245 so that steps can be taken to secure tax accounts and match Social Security numbers or Individual Taxpayer Identification Numbers.
In addition to affecting credit, tax records and earnings records, a criminal record may even be established in someone’s name. So, how can you protect yourself and your clients? The IRS provides a number of tips to protect individuals and recommends steps to take if you think someone may have filed a tax return using your name.
- 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, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.
- Protect your financial information.
- Check your credit report every 12 months.
- Secure personal information in your home.
- Use firewalls and anti-spam/virus software, update security patches and change passwords for Internet accounts on your personal computer.
Other Actions to Take
Unfortunately, the aforementioned list is not all-inclusive. Identity thieves are constantly looking for new sources of information and new forms of technology. If you become a victim of identity theft, the IRS recommends you take the following additional steps:
- Report ID 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.
Remember, the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. More information is available at irs.gov.