Tax season can sometimes be stressful even when things go according to plan, but what happens when you are the victim of tax identity theft?
Here’s a comprehensive guide on tax identity theft, how it works, and what to do if you suspect it.
What Is Tax Identity Theft?
Tax identity theft happens when someone uses your information to file a fraudulent federal income tax return to receive a tax refund. This can happen when someone steals your Social Security number, tax ID number, or other personal information.
Importance of Protecting Against Tax Identity Theft
If you don’t protect your identity during the tax season, it can result in delayed refunds and penalties for late filing and negatively impact your credit. Furthermore, identity thieves can take out personal loans, open credit card accounts, and commit other fraud crimes in your name.
The worst part about tax identity theft is that it can happen without your knowledge, and the road to recovery can be challenging and lengthy.
Who is at risk of identity theft?
Anyone, including children, can be a victim of identity theft during the tax season. Children and seniors are especially are vulnerable to experiencing identity theft. The unfortunate part is that identity theft can go undetected for years.
What Methods Are Employed by Identity Thieves
Phishing
Identity thieves will create fake emails trying to impersonate an organization to get you to reveal information.
Hacking
Identity thieves may even try to hack databases, such as institutions or government agencies, to steal your personal information, such as tax-related documents.
Mail Theft
Believe it or not, your mail can be a target for identity thieves. For example, if you’re mailing or receiving tax documents, a thief could take them through your mailbox without your knowledge.
Pretexting
Pretexting is another scheme that tricks the victims into revealing sensitive information. For instance, the identity thief will impersonate an employer or government agency to obtain personal information.
Social Engineering
Identity thieves manipulate victims’ emotions to get them to compromise their personal information.
How to Protect Yourself from Tax Identity Theft
Fortunately, there are things you can do to protect yourself. Follow these steps to help mitigate the risk and avoid tax-related identity theft in the future.
Protect Your Social Security Number
Be careful about giving away your SSN. Ask if any other form of ID is acceptable for the entities needing it, and refrain from carrying your card around. Keeping your SSN safe is the most important for your personal information because it never changes.
Use Strong Passwords and Consider Multi-Factor Authentication
Utilize a strong password that includes various numbers, symbols, and upper- and lower-case letters, especially using tax preparation software. Also, consider multi-factor authentication to provide extra protection.
Be Wary of Phishing Scams
As mentioned, identity thieves use phishing emails to steal victims’ personal information. So, watch out for any suspicious emails demanding you to click links or download attachments, especially if they claim to be from the IRS. Remember, the IRS will never reach out to you through emails.
Secure Your Devices
When filing your taxes online, use antivirus and anti-malware software on your computer, tablet, or smartphone. In addition, keep your software and operating system updated with the latest security updates.
Monitor Your Accounts
Whether it’s tax season or not, you should monitor your bank and credit card accounts, credit scores, and reports for suspicious activity. This can help stop an identity thief in their tracks.
Shred Documents Containing Personal Information
Consider using a shredder if you need to remove any tax documents this season. Simply throwing away these documents in the trash could put you at risk for identity theft, especially if someone goes through your trash.
Get an IP Pin
An Identity Protection Personal Identification Number (IP PIN) is a six-digit number that the IRS can issue to prevent someone else from filing a tax return using your SSN. IP PINs help the IRS verify your identity when you file taxes electronically or by mail.
Sign Up for An Identity Theft Protection Service
If you want more protection this tax season, sign up for identity theft protection. IdentityIQ identity theft protection services send you real-time alerts if someone tries to use your personal information without your knowledge.
Warning Signs That You May Be a Victim of Tax Identity Theft
Here’s a checklist to help you identify the top warning signs of tax identity theft.
- Receiving a letter from the IRS. If you receive a letter from the IRS stating that more than one tax return was filed using your SSN, that can be a red flag for tax identity theft.
- Unexpected changes to your tax return. If you receive a letter from the IRS that your tax return has been changed or owe additional taxes, it could be a sign that someone filed a fraudulent tax return in your name.
- Delayed tax refunds. Another sign of identity theft is if you still need to receive your tax refund or a letter from the IRS stating that your refund has already been issued.
- Collection notices for debts you don’t owe. Suppose you start receiving debt collection notices but don’t recognize them. These notices could indicate that your information has been compromised.
- Unexpected credit report changes. Do you notice any unusual activity on your credit reports, such as new accounts or inquiries you don’t recognize? This could mean an identity thief has opened new accounts in your name.
What to Do If You Suspect Identity Theft
If you suspect you’re a victim of tax identity theft, here are a few things you can do to help your situation.
File a police report
Contact your local law enforcement agency and file a police report. This report can help prove your innocence.
Contact the IRS
Contact the IRS at 800-908-4490, extension 245, explain your situation, and be prepared to provide any relevant information. The IRS will also have you file an identity theft report with the Federal Trade Commission (FTC).
Complete IRS Form 14039, Identity Theft Affidavit
If you’re a victim of tax identity theft, you will be prompted to fill out the IRS Form 14039, Identity Theft Affidavit, declaring you are a victim.
Place a fraud alert on your credit report
Contact the major credit bureaus and request a fraud alert on your credit report. The alerts notify creditors to verify their identity before opening new accounts.
Freeze your credit report
Placing a freeze on your credit report can help prevent identity thieves from opening new credit accounts in your name. But first, you’ll need to contact the three major credit bureaus. Credit freezes last until you remove it.
Follow up with the IRS
Follow up with the IRS to check on the status of your case and if you need to provide any additional information.
Other FAQs
How common is tax ID theft?
Tax identity theft is on the rise. According to the IRS, they flagged over $5.7 billion in tax fraud in 2022.
Can someone steal your identity with your tax ID?
Someone can steal your identity using your tax ID, such as an Employer Identification Number or EIN.
Do I still have to pay taxes if someone steals my identity?
Yes, the IRS recommends you continue to pay your taxes and file your tax return.
How does the IRS notify you of identity theft?
The IRS Taxpayer Protection Program will send you a letter if they suspect anything suspicious.