Protect your Tax Refund from Identity Thieves

What could be worse than having to file your taxes this year? How about having an identity thief steal your tax return check?

The fact is, identity theft is already the number one complaint that the Federal Trade Commission sees and a very serious problem. Tax related identity theft is one of the major chunks of this growing crime spree. The numbers are startling. In 2010, for example, approximately 15% of identity theft complaints to the FTC had to do with tax returns. Last year, in 2013, that number skyrocketed to 43%.

According to Adam Levin, Chairman and founder of Identity Theft 911, “It’s a lucrative crime and relatively easy to commit.” He went on to say that “all you need is a social security number and some counterfeit documents. It’s much easier than selling drugs or stealing cars and a lot less risky for the bad guys.”

If that’s scary and you’re looking for a way to prevent it from happening, one of the best ways is to file your tax returns early. The reason? If you do, the IRS will possibly process your return before the identity thieves can strike.

The coordinator of the Identity Protection Program at the FTC, Steve Toporoff, said that “it really can be a race to the IRS,” adding that “thieves usually don’t have access to the W-2 forms, so they just make up income numbers and hope their phony return gets through the process.”

If an identity thief is successful, when you file your legitimate IRS tax return it will get kicked out of the system and denied by the IRS computers because it will show that your claim has already been processed and paid. In most cases you’ll get your money but it could be delayed for months, and the IRS says that typically it will take about 180 days to resolve an identity theft case.

The Federal Government is fighting back

One of the top priorities for the IRS today is identity theft and, on its website, the agency says it’s taking ”new steps and strong actions to protect taxpayers and help victims of identity theft and refund fraud.”

There are more than 3000 employees working for the IRS on identity theft issues and over 35,000 employees who deal with taxpayers regularly have already been trained to not only recognize fraudulent returns but also help identity theft victims when fraud occurs.

In 2013 the IRS commenced nearly 1500 criminal investigations into tax identity theft, an increase of 66% from 2012. Also the average prison term for identity theft has been increased to more than three years, almost doubling the prison sentence.

What are the warning signs of tax identity theft?

The first time most consumers find out that they’ve been the victim of identity theft is when the IRS sends them a letter saying that they’ve been denied because there tax return has already been processed and paid. Many times the IRS will inform the consumer that they’ve filed either more than one return or have earned wages from an unknown employer, a tipoff that shows that their Social Security number was stolen and then used by someone to get a job.

You should contact the IRS Identity Protection Specialized Unit right away if you receive a notice like this. They can be reached at 800-908=4490 at extension 245. Once you do you’ll need to fill in some paperwork and do it quickly because you’re already vulnerable to other types of identity theft fraud.

The reason is that once a person has filed a fraudulent tax return successfully, they will then have your social security number and enough information to start opening new lines of credit, committing medical identity and even taking over your other financial accounts.  These criminals may also try to claim a tax refund in your name again next year, meaning that you definitely should get a verification PIN code from the IRS to use in the future when you file future returns.

One last key bit of information to keep in mind is that you should never respond to emails or text messages from anyone claiming to be the IRS simply because the IRS does not send emails or text messages but always contacts consumers by mail.


19 thoughts on “Protect your Tax Refund from Identity Thieves

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  16. Wow, this is scary! I typically process my refund ASAP to get it out of the way, but now I’ll do it early with a purpose – avoiding fraud. Very thorough post!

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