Identity Theft and Your Tax Return

Learn to Protect Yourself From Tax Fraud

One of the most prevalent and costly forms of identity theft involves tax return fraud. It is estimated that in 2013, over $4 billion in fraudulent tax refunds were paid out by the IRS.

The problem has grown dramatically over the last several years, with the IRS investigating over 1,500 cases of criminal identity theft cases involving tax returns in 2013, an increase of over 66% from 2012.

To prevent criminals from getting ahold of your income tax refund, you must first protect your identity.

How Tax Return Fraud Is Perpetrated

In order to protect yourself from becoming a victim of an identity thief committing tax fraud, you must understand how these scams work.

The majority of these crimes are carried out by individuals who collect thousands of Social Security numbers (along with personal information) and use that to file false tax returns.

Usually, these fraudulent returns are filed electronically. A scammer may e-file hundreds (or even thousands) of tax returns in a short period of time, funneling the tax refunds into one or more bank accounts. In most cases, these returns are filed early, so a victim’s tax refund is already gone before they have a chance to file themselves.

READ: An IRS Warning About Phone Scams

Protecting Yourself From Identity Theft

Tax return fraud is a method of stealing money under the guise of identity theft. The people who perpetrate these crimes need very little information to steal tax refund money, and do not need identification to receive the stolen funds. A tax refund can be deposited into any bank account — and the name on the account does not need to match the name on the tax return, which is why many refunds can be deposited into a criminal’s bank account.

Remember that your tax refund is not a gift from the government. Rather, it’s money that you overpaid to the IRS and they are simply returning it to you. To protect your hard-earned money from identity thieves, you must be vigilant about safeguarding your identity. The only information a criminal really needs to file a fraudulent return is your name, birthdate, and Social Security number (SSN).

The IRS has doubled their staff working on identity theft cases, and offers these tips to help taxpayers protect their identities and tax returns:

• Do not carry your SSN on your person. It is imperative to keep your Social Security number as secure as possible. Never carry any document (including your Social Security card) that has your SSN printed on it. Keep all these types of documents in a secure location.

• Do not give out your SSN to businesses. Unless it is required, do not give out your SSN just because a business asks for it. In most cases, providing your SSN is not a requirement, only a request. Your employer, as well as authorized tax filing services, would be exceptions to this rule.

• Secure your personal records in your home. Keep your tax and financial documents in a safe place in your home and on your computer. Use a safe or locking file cabinet for paper documents, and take steps to ensure that your computer is protected from potential hackers.

READ: How to Avoid Tax Scams

What to Do If You Think You’re a Victim

Most people find out that someone else has filed a tax return in their name when they attempt to file their return themselves. Either the IRS or a tax preparer will inform you that your taxes have already been filed.

You may also receive an IRS notice that you owe taxes or that your income has changed. If this happens to you, there are steps you can take so you can receive the tax refund owed to you and protect yourself from further problems:

• Contact the IRS Identity Protection Specialized Unit at 800-908-4490.
• Report the identity theft to your local police, the Federal Trade Commission (FTC), and all 3 credit bureaus.
• Check your credit report to make sure no additional accounts have been compromised.

Even if you are a victim of tax fraud, you are still entitled to your tax refund. By working with the IRS to prove that your identity and tax refund were stolen, you should be able to receive your refund after the IRS is able to confirm the fraud.

Tax return fraud is just the tip of the iceberg when it comes to identity theft. Some victims are forced to spend years clearing up fraudulent credit accounts and poor credit ratings. Protect your identity by keeping all your personal information secure and out of the hands of criminals that will use it for their own gain.

SEE ALSO:

• Woman Arrested for Faking $3 Million Income and Receiving Giant Tax Refund
• Tax Horror Stories That Will Give You Nightmares
• How to Amend Your Federal Tax Return If You Made a Mistake

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