Tax identity theft is a growing problem that can lead to financial loss, legal issues, and a stressful tax season. Scammers use stolen personal information to file fraudulent tax returns and claim refunds before the rightful taxpayer has a chance to submit theirs. Fortunately, there are proactive steps you can take to protect yourself from becoming a victim of tax identity theft.
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- Tax identity theft occurs when a criminal uses your Social Security number (SSN) and other personal details to file a fraudulent tax return and claim a refund.
- The best way to prevent tax identity theft is by filing early! Your refund cannot be claimed by someone else if it was already claimed by you.
- If you suspect you’ve been a victim of tax identity theft, file an Identity Theft Affidavit (Form 14039) with the IRS to alert them of the fraud, report the theft to the FTC’s IdentityTheft.gov website, and place a fraud alert or credit freeze on your credit report by contacting one of the three major credit bureaus
What Is Tax Identity Theft?
Tax identity theft occurs when a criminal uses your Social Security number (SSN) and other personal details to file a fraudulent tax return and claim a refund. Victims often discover the fraud when they attempt to file their taxes, only to be notified by the IRS that a return has already been filed under their name. In some cases, thieves also use stolen information to secure employment, which can lead to additional complications.
Warning Signs of Tax Identity Theft
Being aware of the red flags can help you catch tax identity theft early. Some common warning signs include:
- Receiving an IRS notice that multiple tax returns have been filed in your name.
- Being notified that you owe additional tax for a year you did not file.
- Discovering that your tax records include income from an employer you’ve never worked for.
- Finding out that your tax refund was sent to someone else.
If you notice any of these warning signs, it’s crucial to act quickly to resolve the issue and protect your finances.
How to Prevent Tax Identity Theft
Taking proactive measures can significantly reduce your risk of falling victim to tax identity theft. Here are some essential steps to safeguard your personal and financial information.
1. File Your Taxes Early
Filing your taxes as soon as possible is one of the best ways to prevent tax identity theft. Fraudsters can only file a fraudulent return if they beat you to it. By submitting your tax return early, you reduce the opportunity for criminals to use your information before you do.
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2. Protect Your Social Security Number
Your SSN is a key piece of information used by tax identity thieves. Take the following precautions to keep it safe:
- Never carry your Social Security card in your wallet.
- Avoid sharing your SSN unless absolutely necessary.
- Shred any documents containing your SSN before disposing of them.
- Be cautious of unsolicited calls, emails, or texts requesting your SSN.
3. Use a Secure Filing Method
When filing your taxes, opt for secure methods:
- Use tax software from reputable providers or work with a team of trusted tax professionals.
- If mailing your return, send it from a secure post office location instead of leaving it in your mailbox.
- Ensure that any online tax submission is done over a secure, encrypted internet connection.
4. Monitor Your Credit and IRS Account
Regularly monitoring your financial accounts can help you detect suspicious activity. Here’s what you can do:
- Check your credit reports for unauthorized accounts or changes.
- Use IRS’s Get Transcript tool to monitor your tax records.
- Sign up for an Identity Protection PIN (IP PIN) from the IRS, which adds an extra layer of security to your tax filing process.
5. Watch Out for Tax Scams
Scammers often impersonate IRS agents to trick people into providing sensitive information. Be wary of:
- Phone calls demanding immediate tax payments or threatening arrest.
- Emails claiming to be from the IRS requesting personal information.
- Text messages asking you to click on a link to verify tax information.
The IRS does not initiate contact via email, phone, or text messages asking for personal details. Always verify communication through official IRS channels.
What to Do If You Are a Victim of Tax Identity Theft
If you suspect you have been a victim of tax identity theft, take these steps immediately:
1. Report to the IRS
File an Identity Theft Affidavit (Form 14039) with the IRS to alert them of the fraud. You can do this online or by mailing the form with a copy of your identification.
2. Contact the Federal Trade Commission (FTC)
Report the theft to the FTC’s IdentityTheft.gov website, which provides step-by-step guidance on recovery.
3. Notify Credit Bureaus
Place a fraud alert or credit freeze on your credit report by contacting one of the three major credit bureaus:
- Experian: www.experian.com
- Equifax: www.equifax.com
- TransUnion: www.transunion.com
A fraud alert warns creditors to take extra steps before opening new accounts in your name.
4. Monitor Your Tax Account
Continue to monitor your tax account for any further fraudulent activity. If necessary, request a copy of the fraudulent tax return from the IRS to understand how your information was used.
Stay Vigilant and Protect Your Identity
Tax identity theft can cause significant financial and personal stress, but by staying informed and proactive, you can reduce your risk. File your taxes early, safeguard your Social Security number, use secure filing methods, and monitor your financial accounts. If you suspect tax fraud, act quickly to minimize the damage and restore your identity.
By taking these steps, you can protect yourself from tax identity theft and enjoy a smoother, safer tax season.
