What is tax-related identity theft and how does it happen?
Tax-related identity theft refers to someone fraudulently using your social security number or tax ID number to file a tax return and claim a refund in your name. Fraudsters typically strike early in the tax season, filing a return that looks like it came from you before you file your actual return.
Identity thieves may obtain your social security number and other information in any number of ways, including through phishing emails, scams, or successful attempts to hack online accounts or systems. Having illegally obtained your information, they can then file a tax return in your name and attempt to claim a refund.
What are some telltale signs that I may have been the victim of tax-related identity theft?
There are several ways you may learn your identity has been compromised. In many cases, victims are not aware that someone has impersonated them for tax purposes until they go to e-file their tax returns only to learn they cannot e-file because the IRS system has already recorded a tax return for them for the same tax year.
In other cases, victims may receive correspondence from the IRS about suspicious tax returns or unsolicited copies of tax transcripts. Sometimes, taxpayers receive notices that someone created online tax accounts in their names or are surprised to receive notices of additional taxes owed or collection action taken for a tax year for which they had not yet filed a tax return.
How can I avoid identity theft during tax season?
You can protect your personal information and lower your risk of becoming a victim of identity theft during tax season, or at any time during the year, by taking the following actions:
- Guard your social security number closely, and provide it only on a need-to-know basis.
- File your tax return as early as possible during tax season. If you owe money to the IRS, you can still file your return right away but wait until the usual April deadline to pay the balance due.
- Use secure internet connections and keep your computer's antivirus and malware/spyware detection software up-to-date.
- Research potential tax preparers before giving them personal information.
- Be alert to phishing texts, phone calls, or emails. Understand that the IRS will never initiate contact with you by text, email, or social media, nor will they contact you threatening lawsuits or demanding your taxpayer identity protection pin number.
- Check your credit report at least once a year to confirm nobody has opened accounts in your name. You can request a free credit report from the three reporting agencies using this free Rocket Lawyer Request a Credit Report document.
Taking the above steps can help protect you from falling prey to these and other identity theft attempts. It can be particularly important for anyone that has been hacked, or notified that their information was part of a data breach, to keep an eye on their credit report.
What should I do if I suspect my identity has been stolen?
If the IRS notifies you that they received a suspicious return with your information on it, you may be instructed to verify your identity within 30 days. The letter will include specific instructions for you to follow. After verifying your identity, the IRS will provide situation-specific guidance and next steps.
If your attempt to e-file your tax return is rejected because a fraudster has filed a return in your name already, or if the IRS instructs you to do so, complete and return IRS Form 14039, Identity Theft Affidavit. You also have the right to obtain a copy of the fraudulent tax return. The IRS will assign your case to an identity theft specialist in its Identity Theft Victim Assistance (IDTVA) organization who will work to research and resolve your case as quickly as possible.
In addition to working with the IRS, victims are encouraged to contact their state tax authorities to determine if they were also victims of tax-related identity theft at the state level. Updating computer antivirus and anti-intrusion software and being vigilant about phishing attempts may help to lower the risk of becoming a repeat victim of identity theft.
Understand the risk of tax-related identity theft
Scammers and would-be identity thieves are, unfortunately, becoming more creative and bolder in their attempts to defraud consumers. Being vigilant about protecting your personal information can go a long way in lowering your risk of becoming a victim. However, even someone who takes all of the FTC’s recommended actions can still find themselves unable to e-file their tax returns because an identity thief beat them to it.
If you are concerned about identity theft or have questions about your risk or your rights after a breach has occurred, reach out to a Rocket Lawyer network attorney for affordable legal advice. Rocket Lawyer offers customizable identity theft documents to help you report and handle the fallout from an incident. If you need tax help, Rocket Lawyer can now match you with a tax pro for affordable and convenient tax filing services.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
