Many identity thieves use stolen social security numbers to file fraudulent tax returns. You won't know if you have been the victim until you are denied your tax return.
If you believe that someone has filed a tax return on your behalf, either because your return bounced or that you have received an IRS notification of a suspicious filing, let the Identity Protection Unit of the IRS at 800-908-4490 know about it. Then go to www.irs.gov and download Form 14039, Identity Theft Report. Fax or file the form, along with a hard copy of your tax return, to the IRS (instructions are on the form).
Once the case is resolved, you may receive an Identity Protection PIN (IP PIN) for future use when you file your tax return. If someone tries to file a tax return using your Social Security number and does not include your IP PIN, your request will be denied. You can also request a copy of the fraudulent statement that was submitted on your behalf. Some information will be hidden, but the misrepresentation should help you determine the amount of personal information stolen.
What is tax identity theft?
Usually, when people talk about tax identity theft, it refers to the process whereby someone makes a false statement on your behalf and steals your refund. Unfortunately, it is very easy for crooks if they have your social security number (SSN).
It works like this; an identity thief files a return in your stead and does whatever it takes to finagle the numbers to maximize the refund you are owed. After filing a second refund, the IRS rejects it. Then you are forced to go through the (often time-consuming) process to resolve the issue and receive a refund owed to you.
While filing a fraudulent return may be the most common, it's not the only way criminals can create headaches for you and the IRS. Tax identity theft can also mean someone using your Social Security number to find a job, which later shows you owe unreported income taxes.
What are the red flags for tax identity theft?
Unfortunately, many taxpayers won't know they've been the victim of tax identity theft until they try to file income tax returns. According to the IRS, here are some warning signs that someone might be using your identity to commit tax fraud:
It is not possible to file the income tax return electronically.
Note that IRS records show income earned or not earned by an employer you do not recognize.
Receive notifications from the IRS that someone has signed in or deactivated your online account.
You received a letter 5071C from the IRS asking you to verify your identity.
The IRS will notify you of a new online account created on your behalf.
You will receive an unexpected notification from the IRS stating that you owe additional charges or damages.
You will receive an unsolicited transcript in the mail.
It should be noted that if you've ever discovered identity theft on your credit reports, you have an increased risk of tax identity theft. If, for example, someone has successfully opened a credit card account in your name, they will likely have all of the personal information needed to file a false tax return.
What should you do if you are the victim of tax identity theft?
If you discovered that someone has fraudulently used your SSN (Social Security Number) or other private information with the IRS, you need to act quickly to fix it. In addition to responding quickly to IRS communications, here are other actions you can take:
Complete an IRS Identity Theft Report: You will use IRS Form 14039 to report identity theft to the IRS. After completing the online application form, you will need to print it out, attach it to your tax return, and submit it to the IRS.
File an Identity Theft Report with the FTC: You can file this form electronically to IdentityTheft.gov. In addition to serving as an official crime report, an Identity Theft Report gives you access to a personalized FTC recovery plan.
Request a copy of the fraudulent tax return: If you want to know exactly how your information was used in the false tax return, you can request a copy by sending form 4506-F; request a copy of the fraudulent tax return income to them.
Among other steps to recover from identity theft, you should consider reporting your SSN misuse to the Social Security helpline (1-800-269-0271) and entering alert social security, credit fraud, or freeze your credit records.
Can You Prevent Tax Identity Theft?
It is not possible to eliminate all tax identity theft risks, but reporting early in the tax season can help reduce the risk of becoming a victim of tax identity theft. The sooner this appears, the less time a criminal will have to file a tax return using your personal information.
You can also request an IP PIN (Identity Protection PIN) from the IRS. Once you have this six-digit PIN, no one (including you) can file a return using your SSN without it. In the past, you could only get an IP PIN code if you were a confirmed victim of identity theft. But starting in 2021, anyone can choose to volunteer for the program.
To protect yourself against common forms of identity theft, you can take proactive steps to protect your SSN and periodically check your credit reports.
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