February 10, 2017 – Sadly, tax payer identity theft is a major problem that impacts over one million people each year. It is estimated, the IRS pays out $5.8 billion annually in bogus refunds to identity thieves. Simply put, tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return, claiming a fraudulent refund.
Warning Sings:
The IRS shares these red flags as an indication you’ve been a victim to tax identity theft:
– More than one tax return was filed using your SSN.
– You owe additional tax, or have had collection actions taken against you for a year you did not file a tax return.
– IRS records indicate you received wages or other income from an employer for whom you did not work for.
The Scam
Paperless e-filing has made it easier for fraudsters to pull off tax identity scams. Unfortunately, if your SSN or other personal information gets in the wrong hands, thieves can create a counterfeit W-2, and make up phony wages or other income, then submit the fraudulent tax return electronically to the IRS. Within a month, they will receive your refund by mail or even direct deposit. Even worse, by filing a fraudulent return early in the tax season, the thief can receive the refund before the victim even processes their authentic tax return.
Avoid Tax Identity theft:
– Practicing these habits, consistently, can help avoid your refund ending up in the hands of a thief:
– Leave your Social Security card at home
– Use strong/unique passwords
– Keep financial information private
– Avoid email scams and computer viruses
– Shred tax, banking, and investment documents
– Lock your mail box
For Victims:
If you are a victim of identity theft, the Federal Trade Commission and IRS recommends to file a complaint with the FTC at identitytheft.gov. Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records an close any account at your bank/credit union.
There is good news. The IRS has assigned over 3000 experts to work on identity theft issues and just in the last 3 years, has protected over $50 billion dollars in fraudulent refunds.