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Taxpayer Identity Theft is on the Rise (2.16)


In 2013, there was roughly 5 million fraudulent income tax returns filed with the IRS requesting illegal tax refunds of approximately $30 Billion.  Based on the number of identity theft incidents reported by some of our clients in 2014, it would appear that the problem is worsening.

These crimes are committed by large, organized crime syndications that are based locally and abroad.  First they obtain the taxpayer’s personal identity information usually by hacking into various data bases that contain such information (i.e., insurance companies, banks, loan brokers, medical providers, employers etc.).  Once they have obtained the identity information, they begin by filing fraudulent federal and state income tax returns for the taxpayer.  These are usually filed early in the tax season so that they get processed before the real taxpayer gets their tax returns filed for the year.   The fraudulent tax returns request refunds to be submitted either to a physical address where the funds can be safely retrieved, or, sent electronically to fraudulent accounts which have been set up in the taxpayer’s name.  As if this isn’t bad enough, it is very typical that other identity theft crimes are being orchestrated simultaneously as the tax fraud…these other crimes include setting up new bank accounts and credit cards in the name of the taxpayer.

Steps to take if you’ve become a victim…

If you’ve been made aware of, or, suspect that your Social Security Number (SSN) has been compromised, you should take the following steps to remedy or mitigate possible damages caused by the theft:

1.  File a complaint with the Federal Trade Commission (FTC) at https://www.identitytheft.gov
2.  Get a free credit report from one of the three major credit bureaus and review it carefully for suspicious activity. A credit report review should be done annually as a preventative measure. 
3.  Consider placing a “Fraud Alert” on your credit records.
4.  Contact the financial institutions that show suspicious activity based on your credit report review.
5.  Contact the IRS and State taxing authorities and notify them that your SSN has been compromised. There are specific forms to complete which can be filed with your income tax returns.  You will need to discuss this further with your tax preparer.
6.  Consider using a company such as LifeLock to provide identity protection (either while the fraud alert is in place or as preventative measure).
7.  If you e-file, consider requesting an e-file PIN number from the IRS which can replace filing under your SSN.

In addition to the preventative measures listed above, there are some other things to consider doing in your fight against future identity theft:

  • Always use security software with a firewall and anti-virus protection. Use strong passwords and have a routine for changing them periodically.
  • Learn to recognize and avoid phishing e-mails that request ID information, threatening phone calls and texts from thieves posing as legitimate organizations such as your bank, credit card companies and even the IRS.
  • Do not click on links or download attachments from unknown or suspicious e-mails.
  • Protect your personal data. Don’t carry your Social Security Card with you and make sure to keep your tax records in a secure file.

If you have any questions regarding identity theft or your personal information has just been compromised, please do not hesitate to contact our office for assistance at (949) 260-1430.

Written by Jody Fouch