The IRS began accepting tax returns on Jan. 31 marking the official opening of this year’s tax season. Imagine filing your 2013 taxes and anxiously awaiting your refund to learn not only that your refund will be significantly delayed, but that you are also the victim of identity theft. It’s happening more and more in what the IRS describes as a “growing epidemic” of tax refund identity theft.
How it works is that identity thieves use stolen names and the corresponding Social Security numbers to file fraudulent tax returns early in the tax season in order to collect refunds before most tax payers file returns.
The IRS issues 90 percent of refunds within 21 days of receiving the return and some go out in less than two weeks. However, it often takes several months or longer for the IRS to receive and verify tax‐related paperwork issued by employers and financial institutions and confirm those numbers with claims made on tax returns. This delay provides the perfect window of opportunity for identity thieves in possession of valid names and Social Security numbers to create phony documents and use those documents to apply and receive refunds.
Taxpayers typically don’t realize they are victims of tax return identity theft until filing a legitimate return and receiving a notice from the IRS indicating that multiple returns have been filed or that wages from an unknown employer or income from an unknown source were claimed.
The good news is that victims of tax return identity theft are not liable for the missing refund and the IRS will eventually send the correct refund. The bad news is that it will take at least six months for the IRS to resolve the issue. If you receive a notice from the IRS and suspect you are a victim of tax return identity theft, there are several steps you should take:
- Immediately contact the IRS Identity Protection Specialized Unit at 1‐800‐908‐4490. As a part of the process you will also need to fill out the IRS Identity Theft Affidavit, Form 14039.
- Respond promptly to all IRS notices.
- Report the theft to the Federal Trade Commission.
- File a report with the local police.
- Close any affected bank and credit card accounts.
- Check your credit reports.
- Contact one of the three major credit bureaus: Equifax, Experian or TransUnion and set up a fraud alert. By setting up a fraud alert with one bureau, your information will automatically be conveyed to the other two bureaus.
There are also several steps you can take to guard against tax return identity theft:
- File early and beat the thieves at their own game. By filing early, there is nothing for them to take.
- If you don’t receive your refund within a month of e‐filing, check its status.
- If you receive a phone call, fax or letter from someone claiming to be with the IRS, verify it by calling 1‐800‐829‐1040. Be aware that the IRS does not send unsolicited, tax‐account related e‐mails to taxpayers and never asks for personal and financial information via e‐mail. If you receive an e‐mail stating that it is from the IRS, forward it to email@example.com.
- Don’t store tax returns on your computer. Once you’ve filed, transfer the information to a flash drive or CD and secure that somewhere safe.
- Order a tax transcript from the IRS website. Compare this with your personal records and if you spot a discrepancy, contact the IRS immediately.
This article has been published previously in a First Command publication.