Beware: Tax ID Theft
June 10, 2016
With taxpayer ID theft on the rise, you need to know how to protect yourself and to be prepared if it happens to you.
The IRS has been focusing on identity theft (ID) schemes that are aimed at stealing taxpayers’ refunds. When this type of fraud occurs it creates delays in taxpayers’ getting refunds and requires taxpayer communication with the IRS to prove your identity. Here’s a look at how a typical tax identity theft scheme works.
The thief uses a taxpayer’s legitimate name and social security number (SSN) to fraudulently file a tax return showing a refund due to the taxpayer. They typically file these fraudulent returns very early in filing season before the taxpayer has had a chance to file his/her tax return. When the true taxpayer attempts to electronically file his/her tax return the IRS rejects it because another tax return has already been filed for that taxpayer. At that point the true taxpayer typically files IRS Form 14039 (dagi can assist you with that form) and submits that form and a paper tax return to the IRS with proof of ID (i.e. a copy of the driver’s license or passport). The IRS will issue the taxpayer an ID Theft PIN so the taxpayer can resume electronic filing but only if they enter the special ID Theft PIN each year.
There are a number of ways to protect your identity and they mostly revolve around not sharing your social security number with anyone unless absolutely necessary (for example, your physician typically does not need it, but they will still ask for it) and not responding to “phishing schemes”. Initial contact from the IRS will always come in the form of correspondence through the mail. Of course the standard rules about changing passwords and checking your credit report annually are also simple steps you can take to protect your identity.
dagi has a few tips and tricks that can help you and your loved ones avoid becoming victims of ID theft:
- File your tax return as early as possible during tax season
- File tax returns annually for your children even if they are not required to file a tax return to ensure a thief isn’t filing a return using their name and SSN
- When a loved one passes away, the Executor or Personal Representative for the Estate should be sure to file a final individual income tax return for the decedent to alert the IRS that the person has passed and to flag their account
- Always alert dagi if you receive correspondence from the IRS. The IRS has implemented a new Identity Verification Service (IDVerify) whereby they will have you confirm your ID online or they could request that you call them. dagi can tell you if the correspondence you receive is legitimate or fraudulent
- Please do not take Tax ID Theft lightly, it can happen to anyone and it can take years to sort through with the IRS
Contact Rebecca at dagi if you have questions or concerns about tax ID theft.