Odds are rapidly increasing that you could become a victim of identity theft or have your tax refund stolen. In early 2015, the IRS announced that tax-related identity theft was once again a major concern for consumers, naming it to the agency’s “Dirty Dozen” tax scams list for the year.
According to the latest data available, the IRS paid out roughly $5.8 billion in fraudulent returns in 2013. In 2014, the agency initiated 1,063 identity theft-related investigations.
What should I do if my federal tax refund was stolen?
According to the IRS, the five most important steps to take after becoming a victim of tax identity theft are:
1.Report the identity theft. File a police report and get a report number.
2.Contact Equifax and the other major credit reporting agencies (CRAs) to place a fraud alert on your credit report.
3.File an Identity Theft Report with the Federal Trade Commission (FTC), either online or by phone at 877-438-4338.
4.File IRS Form 14039, the Identity Theft Affidavit.
5.Be sure to pay your taxes and file your tax returns—don’t wait until your case is resolved. If you file on paper, you may want to include both a cover letter explaining that you are a victim of identity theft and also a copy of Form 14039 so the IRS does not reject your paper tax return.
You can also ask the IRS for an Identity Protection Personal Identification Number (IP PIN). This unique six-digit number will help the IRS verify that it is, in fact, you who is filing the tax return. If you have a security freeze with Equifax, you must first contact Equifax to have the freeze temporarily removed before you can register for an IP PIN. Once you have your IP PIN, you can contact Equifax to resume the freeze, or you can have it scheduled to resume automatically.
If you choose to receive an IP PIN, you will need it to file your taxes next year, and you will not be able to file your taxes online if you fail to include the number. If you file a paper return and fail to include your IP PIN, there will be a delay in processing your return.
You can’t currently opt out once you receive an IP PIN, which means you’ll need the number to file federal taxes for all subsequent years.
There are conflicting reports from tax professionals and taxpayers about the automatic issuance of IP PINs in the years after an identity theft. Some people report that they have received their new IP PINs in the mail without requesting them, while others are wondering why they haven’t yet received theirs.
The process for the IRS to resolve its internal records for the current year’s refund could take several months. If you don’t hear anything after three months, call the IRS’s Identity Protection Specialized Unit at 800-908-4490.
I haven’t yet received my refund. Has it been stolen?
If you filed a tax return and haven’t received a refund, don’t automatically assume your refund was stolen. First, check to see what is delaying your refund. The IRS has a “Where’s my Refund?” tool as well as the IRS2Go phone app. It is possible that there is a legitimate delay. For example, you may have an Earned Income Credit, an Affordable Care Act insurance premium credit, or another refundable credit coming back to you. Those need to run through some special cross-references to ensure that your refund claim is legitimate. Or, you may have offsets from unpaid taxes or other government-related debt.
If your refund is still missing without explanation after six weeks, call 800-829-1040 to ask about the problem.
Reducing Your Chances of Tax ID Theft
To help reduce your chances of being a victim of tax identity theft, keep a close eye on your sensitive personal information. Don’t carry your Social Security card with you, and only give out your Social Security number when absolutely necessary. Avoid mailing sensitive information whenever possible, and when you must, take it directly to the post office vs. leaving it in your mailbox. You should also check your credit report regularly, whether annually via AnnualCreditReport.com or more frequently by purchasing a credit monitoring product.
While there’s no sure-fire way to prevent tax identity theft, ensuring your personal information stays personal is a good first step.
Eva Rosenberg, EA, is the publisher of TaxMama.com®, where your tax questions are answered. She teaches tax professionals how to represent you when you have tax problems. She is the author of several books and e-books, including Small Business Taxes Made Easy. Follow her on Twitter: @TaxMama