You have taken strong measures to secure your credit cards. You shred paperwork at home to be sure your trash doesn’t give any clues to your identity. Still, you could become a victim of tax identity theft.
Tax-related identity theft is a growing problem. Years ago you’d never dream that your identity could be stolen or your tax return refunds might be taken by someone else. So how can this happen?
Tax return identity theft occurs when someone uses a taxpayer’s personal information, such as his or her name and Social Security number, without permission to commit fraud on that person’s tax return. Doing so enables the imposter to claim refunds or credits he or she is not entitled to. The thief tends to find success by being the first filer (early in the tax season) to claim the W-2 information and withholdings. The perpetrator will often file before the IRS has the W-2 or 1099 forms so that he or she can submit the tax return before matching can take place.
Catching it
When the true holder of the name and Social Security number files a tax return, especially if it’s filed electronically, the IRS immediately matches the name and Social Security number and can see that a return has already been filed with this identity. The second person to file then has his or her return rejected, with the explanation that another person has already filed using that name and Social Security number. If you submit the return by paper, the IRS will send you a notice indicating that more than one return has been filed for the taxpayer in the tax year. The IRS might also indicate that the wages or other information claimed did not match information submitted.
(Continued)
Don’t let it happen to you
Besides being careful never to share your personal information, what can you do to prevent the theft of your tax identity? NEVER (yes, I’m shouting this because I really need to get your attention) give your Social Security number to third parties without knowing that the information is secure. Be careful of email requests, telephone phishing, and Dumpster diving. Here are some other things to remember:
- The IRS does not solicit information by email. So no matter how authentic the email looks, do not share personal information.
- If you receive a letter from the IRS questioning documents that you have submitted and those documents don’t match your own information, be sure to contact a trusted adviser to determine whether you might be a victim of this type of theft. Financial advisers know how to contact the proper authorities and will help report your suspicions.
- If you are a victim of tax identity theft, you may also be advised to file a report with the local police. You most likely will have to close any affected bank and credit card accounts and will need to inform the credit bureaus to gain their assistance.
- You will also need to contact the IRS Identity Protection Specialized Unit and complete a form to prove that you are the correct person holding your identity. The unit will typically provide you with a special PIN number that assists with any future correspondence.
The IRS takes such theft seriously. It will work with you to help you expedite the processing of your tax return once it has proof of your identity. In the meantime, be sure to check your credit report at least annually and resist providing your Social Security number to third parties. Often applications do not require this information and you can’t be sure of its security once it is provided. Always be careful with your personal information. It’s much easier to protect it than recover it after the damage is done.
Click here to sign up for the free IB ezine – your twice-weekly resource for local business news, analysis, voices, and the names you need to know. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.
