It has been become very common to hear news about occurrences of identity theft where confidential information being stolen and used to steal a person’s money by taking over the identity of that person. Most often the start of that process begins when sensitive data is stolen by a data breach. There are many forms of identity theft. For tax purposes, this occurs when a person or entity obtains your social security number (SSN), and uses that SSN number to file a tax return to claim a fraudulent refund claim. Unfortunately, this has been happening on a regular basis with both the IRS and state taxing authorities.
You may not know that your identity has been stolen for many months after the tax return is filed, and often you only find out when you attempt to file your real return and are told by the IRS that a return was already filed or the income tax return that was filed looks suspicious.
The thieves are very clever. In the past, they would setup fake bank accounts to receive the refund monies. As they have become more sophisticated they often use your real bank account information, and then they contact you acting that they are from the IRS and telling you that they made a mistake, and to return the money (to a fake account). The phone calls from the thieves are very authentic, so many people are falling victim to this scam.
It is good to protect yourself by being aware of the warning signs that there may be trouble. Be aware of the tax notices that the IRS issues, since they may offer clues that an issue exists. If you are sent a notice that your refund was offset against another tax liability, that is a signal that a return was filed and you should contact the IRS. The other common clue is that a tax return was filed that had wages that were not yours.
There are a few steps you can take once you think you are a victim of identity theft of your SSN. You can place a fraud alert with the three credit bureaus which will help stop further damage. The next step would be to close any bank accounts created by the identity thieves, and try to lower your number of bank accounts as much as possible to be able to better monitor them. If they used your social security number, respond to the notices the IRS sent, and call the IRS to put them on notice of the overall issue. You will then complete a form 14039, which is the identity theft affidavit. You then attach that affidavit form to your actual income tax return and mail it to the IRS. Each state also has a similar form and procedures. You should also pay any taxes you owe (not the fraudulent numbers), and file all your income tax returns on time. It is very important to stay on top of the IRS about this issue. If you feel after a few months that adequate progress is not being made, they have a specialized group that handles identity theft matters and there phone number is 1-800-908-4490.