Revised – February 17, 2024
This article was originally published in 2018 and, sadly, the issues we faced then are still prevalent today. What has changed is the onslaught of technology fueled by artificial intelligence and machine learning. So now the bad guys have weapons that, honestly, most of us couldn’t have imagined even two or three years ago. Our hope is we will make readers more aware of tax filing and tax fraud scams that can rip their most treasured information away from them.
It’s that time again for your annual trip to the financial dentist. Tax time.
Whether you do your taxes yourself or pay a service, it’s a great feeling to send off your return with a refund in the works.
Until…
You receive a letter from the IRS politely telling you that your tax refund has already been processed.
You’ve become the newest member of the tax-related identity theft club. Millions of hard working Americans fall victim to this growing problem every year.
Let’s dig into what you can do and what to look for to protect your information.
What steps can I take to prevent tax-related identity theft?
Tax-related identity theft occurs when someone uses your stolen Social Security number to file a fraudulent tax return under your name.
If you’re lucky, you will receive a letter from the IRS telling you it suspects a fraudulent tax return has been filed under your name. Otherwise, you’ll find out once you’ve filed. Either way, you have some annoying and potentially time-consuming work ahead to clear up the problem.
Here’s the good news: You will eventually get the refund due you from the IRS and/or your state.
The most effective way to lower your risk for tax-related identity theft is to file early. If you don’t, you can be assured the thieves will. For them, the earlier they file, the earlier they get your refund in their hands.
We have compiled seven steps that will help you get the problem cleared up and your refund in your hands.
Step #1: Report the Refund Theft Immediately
You have several options. The best place to start is at the IRS identity theft website; https://www.identitytheft.gov/#/. Or, you can call the IRS Identity Protection Specialized Unit at 1-800-908-4490. You’ll also need to complete an identity theft affidavit, or IRS form 14039, so that the IRS can place an alert on your account.
Also, don’t forget to contact your state revenue or taxing agency. After all, identity thieves can and will do a significant amount of damage with your Social Security number. You only get one.
Lastly, report the theft to your local police department. While law enforcement is unlikely to investigate the crime because it’s typically a Federal matter, many government agencies and credit bureaus require an official police theft report to help finalize the issue.
You will also want to report it to your personal financial institutions like banks and credit card companies.
Step #2: Compile Your Evidence
Make sure you have copies of your tax returns from the past two or three years. In addition, by providing this supplemental information that the IRS can check against, you strengthen your case that the theft of your return is the legitimate one. For example, an ID thief is unlikely to know that you got divorced two years ago and stopped filing jointly, but this fact can easily be checked by the IRS, giving your filed return more credibility.
There are other pieces of information you’ll want to have handy: driver’s license, birth certificate, passport. You may also be asked for recent utility bills. Plus, if you’re married, have your marriage certificate. You’ll need to mail copies of all these documents as well as your police report for the IRS to verify your tax return.
Step #3: Protect Yourself for The Future From Being a Victim of Tax-Related Identity Theft
At this point the IRS should issue you a personal identification number, or PIN, to provide another layer of security. You’ll need to submit this PIN along with your Social Security number when you file any tax form going forward so that the IRS knows to carefully check your account. Since the government can’t give you a new Social Security number, this is how you’ll protect yourself. As an identity theft victim, you’ll get a new PIN every year.
Remember, as technology moves along, we need to keep in mind that our phones, tablets, and computers are easy prey for identity thieves. IRS studies show that fraud alerts are often linked to a phone number. Therefore, your tax refund criminals along with other ID thieves constantly attempt to access their victims’ cell phone accounts to redirect those messages to them. Protect your smartphone:
- Ignore unknown numbers that could harbor malware.
- Be very careful when downloading applications and disable those you don’t use.
- Make sure you also have an email address attached to fraud alerts and other identity theft-worthy news.
Tax season is not the only time identity thieves strike, Protecting your records is a year-round effort. For example: Don’t carry your Social Security card or other documents with your Social Security Number on them. Only provide your SSN if it’s necessary and/or you know the person requesting it. Also, protect your computers with anti-spam and anti-virus software, and routinely change passwords for your accounts. This will give you a much greater chance to keep your refund just to yourself.
Finally, don’t fall for phishing scams. The IRS will NEVER call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Any type of threatening phone call from someone claiming to be from the IRS is a hoax and should be reported to the police.
Step #4: Contact the Credit Bureaus
If you are a victim of identity theft, the Federal Trade Commission recommends contacting one of the three major credit bureaus to place a fraud alert on your credit records immediately:
· Equifax, www.Equifax.com, 800-525-6285
· Experian, www.Experian.com, 888-397-3742
· TransUnion, www.TransUnion.com, 800-680-7289
If a thief had enough information about you to file a false tax return, he/she could have also opened new credit card accounts or taken out a loan in your name with that financial information.
Set up free fraud alerts with the three major credit reporting bureaus: Equifax, Experian, and TransUnion. These alerts, which last 90 days, but can be renewed, warn potential creditors or lenders that you are an identity theft victim and that they must verify your identity before issuing credit.
You can even go a step further by placing a full credit freeze on your files, which instructs the credit agencies to prevent new creditors from viewing your credit score and report. With a police report, it’s free. Without one, it can cost as little as $10, depending on your state. A credit freeze will keep you from accessing instant credit, too. So, if you need to apply for a loan, you will need to give the agency permission to access your data, and in some cases, you may have to pay a fee to lift the freeze, which can take a few days.
Step #5: Check Your Credit Reports
As an American consumer, you are entitled to a free copy of your credit report from each of the three agencies. Check them regularly and carefully for unauthorized activity. Look at your history as well as recent activity. Just because you were the first person alerted to the problem through a false tax return does not mean that’s where the ID theft began.
If you see errors in your report, such as wrong personal information, accounts you didn’t open or debts you didn’t take part in, immediately notify your bank, one of the credit agencies, and the businesses reporting that inaccurate information.
Step #6: Change ALL Your Passwords
In the past, most thieves collected data about a taxpayer and then created an account at a tax preparation software site to file a false return. But Intuit, the parent company of TurboTax, says criminals are changing their tactics.
Thieves know that people use the same password at multiple websites. This is one of the worst security mistakes we can make. When usernames and passwords are compromised in a data breach, a thief could use them to open a TurboTax account and file in your name.
If you have an online account at a site like TurboTax, make this password unique from any other passwords you use online. If you use your tax prep password at your bank or any other site with personal information, change that password immediately, as well as any other consistent accounts.
Step #7: Be Patient
The IRS says a typical case of ID theft can take up to 180 days to resolve. And even after you’ve cleared up this year’s tax mess, tax and credit fraud can be a recurring problem.
Once the IRS has determined that your return has been fraudulently filed, the IRS will flag the actual return that you file and process it manually, examining every detail to figure out which return is authentic. This means your refund will most likely be delayed for months.
Remember…The IRS will always pay you your refund, regardless of whether it already paid it out to a thief.
So, be proactive to protect yourself with security software with firewall and virus/malware protection. Also, only give personal information on encrypted websites. Look for “http” addresses and use strong passwords to protect them.
(New information) How are new technologies like AI and Machine Learning impacting identity theft?
Trying to cheat the IRS is a full-time job for scammers, and new technologies are helping them be more successful. Here are some of the newer types of scams:
· Text Message Scams. Scammers are using their expertise from email scams with texts. They claim to be from reputable organizations like the IRS (the IRS will NEVER text you with a request for personal information). Scammers will tell you there are issues with your bank accounts, credit cards or loans and provide links for you to respond. DON’T RESPOND. You can always check with the source to see if the request is legitimate.
· Social Media Scams. Technology now allows scammers to impersonate individuals, companies, or government agencies. They create fake profiles to steal your prized personal information. Be extra cautious about accepting friend/follow requests from people you don’t know.
· Cryptocurrency Scams. Scammers are taking advantage of loose regulations to trick people into fake investments and phishing schemes. Check out the source before providing any information. Only deal with reputable cryptocurrency platforms.
· Vishing (Voice Phishing). The phone remains a gateway for fraudsters. Scammers are still finding new ways to use the phone as a weapon. These calls impersonate legitimate organizations, including the IRS, to get personal information like bank accounts. Do not give personal information to anyone you don’t know unless you have initiated the call.
· Deep Fake Scams. This is just becoming a big problem. Using new technology, scammers can impersonate anyone, including an employee from the IRS. Always verify by calling the source before giving out information.
If you have any questions, concerns, or tips, we’d love to hear from you. Please visit our website at www.sttstl.com or if you’d like to learn more, give me—John Steinhauser—a call at (314)795-0004 or email me at john@sddstl.com
And stay safe out there!
John Steinhauser, co-owner, Secure Document Destruction of St. Louis (SDD).