Avoid Becoming A Victim Of Tax-Related ID Theft

Identity thieves are hard at work year round, but they’re especially active during tax season. Take preventative measures at tax time to minimize risk.

Tax-related identity fraud has been on the rise for the past 10 years, and the IRS continues to increase their number of identity theft filters used to identify fraudulent tax returns. Last year, the IRS confirmed 12,617 tax returns as fraudulent by March 2,2023.

This type of identity theft generally occurs in one of two ways – the fraudster will either use a person’s Social Security number for employment purposes and get a tax return that way, or simply obtain enough information to file a tax return as a different person. Victims aren’t usually aware of the theft until their tax return is rejected by the IRS or they receive a letter stating not all income was declared.

Reduce your risk of becoming a victim of tax-related identity theft with these tips.

Take Preventative Measures

File Early  

It’s best to file as soon as you receive all tax-related documents – this will ensure any other attempt to file a return will be rejected as a duplicate. If someone submits a fraudulent return before you, you’re expected to mail your tax return to the IRS with Form 14039 attached. You may request a copy of the fraudulent return, but processing your return will likely be delayed.

Use Caution With Tax Return Preparers 

No matter how you file, it’s important to use a reputable source and exercise extreme caution. ‘Ghost’ tax return preparers leave no trace of who they are when assisting taxpayers with returns, may claim phony deductions to boost refunds, and could direct refunds to their own account. By law, tax preparers are required to have a valid Preparer Tax Identification Number (PTIN) and must sign tax returns as a paid preparer.

Consider E-filing  

If eligible, there are many advantages to e-filing. For one, you can receive a refund within three weeks if you elect direct deposit. This is significantly less than the six to eight weeks it takes to process mailed returns. Additionally, you’ll receive immediate confirmation upon submission – you’ll be notified if your return is rejected, and your information will be sent securely. See if you’re eligible for the IRS Free File or save with a discount.

Stay Informed  

Taxpayers should note the IRS will never contact you by email, text, or social media. They’ll only mail notices for overdue tax bills and never require an immediate payment over the phone. IRS impersonators may try to intimidate you with threats, such as suspending your SSN or driver license to get you to wire money or mail gift cards. Read our Beware Of Tax Time Scams article and review the IRS’ Consumer Alerts to learn more.

Create An IP PIN

Taxpayers now have the option to create an IRS Identity Protection PIN (IP PIN). If you’re a confirmed victim of tax-related identity theft, the IRS will mail you a CP01A Notice with your new IP PIN each year.

If you don’t already have an IP PIN, you may get one as a proactive step to protect yourself from tax-related identity theft. An IP PIN is valid for one calendar year and a new one is generated each year. Correct IP PINs must be entered on electronic and paper tax returns to avoid rejection and delays.

Act Quickly If You’re A Victim

Recommendations from the IRS include filing a complaint with the Federal Trade Commission, filing a paper return with an affidavit attached, placing a fraud alert with at least one of the credit bureaus, notifying the IRS, and closing fraudulent accounts you may have discovered. Check out this taxpayer guide to identity theft from the IRS for more information.

To obtain your credit report at no cost, visit annualcreditreport.com. Obtaining your report will not harm your credit score and will give you an opportunity to ensure accurate reporting.