What Is Tax Identity Theft?

Tax identity theft occurs in numerous ways. "Identity theft," as indicated by the IRS, usually involves someone stealing a specific Social Security number (or tax identification number) to file a fraudulent return requiring a fraudulent refund. Taxpayers often discover identity theft when they attempt to file an income tax return electronically, only to find out that a tax return has already been filed using the taxpayer's social security number. Identity theft can also be known by receiving a letter from the IRS stating that the IRS has identified a suspicious statement using the taxpayer's social security number. In many cases, the fraudulent claimant claims a refund for fewer payments or credits on the account, which is a signal to the IRS.

According to the IRS, "telephone fraud" involves fake phone calls from those who try to extract unwanted payments from taxpayers. Victims are often threatened with arrest, expulsion, and retreat.

"Phishing" involves false emails on tax balances or fake and usually unforeseen tax refunds; they typically include links to fake websites that search for personal information. As the Internal Revenue Service notes, the agency "will never send taxpayers an email containing an invoice or refund from nowhere."

Do you think that you are a victim of identity theft? Take action

Problem: Attempt to send a statement by email, but rejected because another had already been submitted?

Solution: You must submit a paper statement, including Form 14039, Statement of Identity Theft. In the case of joint repatriation, it is necessary to include a Form 14039 for each spouse and a copy of the identity document for each spouse. If the electronic filing has been attempted or expires, the paper filing must be submitted during the five-day cure period. As always, you must use the following delivery service (for example, American certified mail, UPS, or Federal Express). After that, the IRS Identity Theft Line must be contacted at 800-908-4490 (8:00 am to 8:00 pm local time).

Problem: You have received a notification from the IRS that a potential fraudulent statement was attempted to be filed on your account.

Solution: Answer immediately by calling the number indicated in the letter. Note that the IRS generally communicates with taxpayers only by mail. IRS letters/notifications relating to tax identity theft cases include:

• A letter 5071C (informing the taxpayer that the IRS has received a tax return with your name and social security number and that you must verify your identity);
• Letter 4883C (informing the taxpayer that the IRS needs additional information to verify the identity to process the tax return properly),
• Letter 12C (indicating that the IRS has received the income tax return, however, additional information is required to process the income tax return),
• Letter 4310C (letter of adjustment identified by the IRS after identity theft).

 What more can you do?

• Request an identification number for personal identity protection (IP PIN): Demand an IP PIN from the IRS. This is a six-digit number assigned to qualified taxpayers that helps avoid the misuse of the Social Security number in fraudulent federal tax returns.) Upon request, the IRS will issue a warning CP01A with the IP PIN code. Please note that IP PINs are currently available for all tax identity victims and any taxpayer residing in Florida, Georgia, or the District of Columbia (the three jurisdictions with the highest number of per-capita incidents of identity theft). Currently, IP PINs are only issued in January, and a different IP code is assigned to each IP user each January. 
• Request for a copy of the fraudulent tax return: The victim of identity theft or an authorized person may request a written version of a deceptive statement that has been registered and accepted by the IRS using the name and social security number.
• Contact the police. Submit a police report to your local police station.
• Report to the Federal Trade Commission (FTC): Submit a report online or by calling 877-ID-THEFT.
• Submit a fraud report representing the IRS to the Inspector General of the Treasury of the Tax Administration. Fill out the form online or call 800-366-4484.
• Activate a fraud alert and a credit lock: Contact a credit bureau and activate a credit and blocking notice. A scam warning requires creditors to take extra precautions to verify your identity before granting credit on your behalf. To enable one or both, contact:
• Be patient: The IRS has made tremendous progress in identifying tax-related identity theft cases and taking swift action to help prevent it; however, the complete process of settling a taxpayer account will take time. Please also note that the IRS will likely freeze all refunds while it completes such resolution.

General Tips to Prevent Identity Theft

• minimize personal information in wallets or purses; consider using an RFID blocking wallet; keep copies of this information
• Destroy any document that contains personal data.
• Avoid providing personal information over the phone.
• Protect your computers with firewalls, virus protection, and security patches.
• Avoid opening or clicking emails with suspicious links.
• Monitor your accounts and view your financial statements frequently
• Check that the email has not been opened before
• Review credit reports periodically.
• Consider a protection service against identity theft.