The Federal Trade Commission (FTC) is kicking off 2015 with Tax Identity Theft Awareness week, January 26 to 30. The purpose of this week is to educate people about identity theft—which could be anyone with a Social Security number (SSN).
More than 1.6 million people were affected by tax identity theft in 2013. The IRS estimates that it paid out $5 billion to identity thieves in the 2013 filling season and prevented an additional $24 billion in fraudulent refunds from being processed.
(To learn more about Tax Identity Theft Awareness Week or to join the FTC’s identity theft webinar, click here)
What is tax identity theft?
Tax identity theft occurs when someone uses your SSN to file a tax return or to obtain a job and report earnings under your SSN. Unlike other types of identity theft, you can’t discover tax identity theft from your bank transactions or credit report. Often consumers learn they’ve been a victim when the IRS refuses to issue a refund or requests money for income that you didn’t earn.
How does tax identity theft happen?
In order to commit tax identity theft, the criminal must have access to your SSN or other pieces of your personal information, such as your full name or date of birth.
Thieves can obtain this information in a number of ways, including from medical records, either through a data breach or from access by an employee at a medical facility; from your wallet or passport if it falls into the wrong hands; from your mail if you throw away sensitive documents without shredding them or send your personal information in the mail; through physical theft; or through familiar fraud, where a family member or friend steals your sensitive personal information.
Once a thief has access to your information, he or she can file a tax return in order to receive your tax refund.
What you can do to protect yourself
Despite the variety of ways in which a thief can obtain your personal information, there are things you can do to help protect against identity theft.
1. Protect your SSN and other personal information.
It may seem like common sense, but you should never give out your SSN to someone you don’t know. You should also be wary of giving it to a business, such as your doctor’s office. Ask if there is some other identifier you can use, such as the last four digits of your SSN or a separate identification number. In addition, don’t carry your Social Security card in your wallet.
When it comes to personal information, you should always be careful of how you dispose of old paperwork and sensitive documents, such as bills, medical records, and tax information. According to the IRS, the onset of tax season brings with it an increase number in phone scams, during which a person may call you and try to convince you that you have a refund due, or may try to persuade you into sharing personal information. These callers may sound convincing and may know a lot about you, but you should never give personal information over the phone.
For detailed information about the methods in which the IRS may contact you or for more information about phone scams, please go to http://www.irs.gov/uac/Tax-Scams-Consumer-Alerts
2. File your taxes early.
If the IRS receives two sets of tax forms, it will typically flag the second return. By filing as early as possible in the tax season, you can make sure you’re filing—and getting your refund—before a tax fraudster. According to the IRS, the typical tax identity theft case takes about 180 days to resolve.
3. Choose your tax preparer wisely
Tax preparers may be in a more advantageous position to commit tax identity theft than others because they often handle personal information and are more familiar with IRS processes. Make sure you conduct a thorough review of your tax preparer before you entrust him or her with your personal information. The IRS offers some tips for choosing a tax preparer here.
4. Check your credit report
Once a thief has your personal information, he or she can open credit accounts in your name in addition to committing tax identity theft. Monitoring your credit report can alert you to other types of identity theft, such as a thief applying for credit cards or mortgages in your name. Consumers are entitled to one free credit report from each of the three credit reporting agencies every 12 months through AnnualCreditReport.com. If you want to check your credit on a regular basis, you may also want to consider purchasing a credit monitoring product. If someone uses your SSN to commit tax identity theft, you’ll get a notice or letter from the IRS telling you that more than one return was filed for you or that you received wages that you didn’t report. If you get a letter like this, contact the FTC and the IRS as quickly as possible. Resolving identity theft can take years, and that could give the identity thief several opportunities to file in your name.