Tax season ushers in new waves of tax-return identity theft.
Scammers try get people to give them personal information — especially a Social Security number (SSN) — for all sorts of reasons. Typically, they steal a tax refund, get a job, drain a bank account, run up credit charges, open new utility accounts and/or get medical treatment on someone else’s insurance. In 2018, imposter scams — which are commonly perpetrated by fraudsters posing as representatives of banks, debt-collection companies, employers, the Internal Revenue Service (IRS), the Social Security Administration and other government agencies — for the first time topped the list of consumer complaints reported to the Federal Trade Commission (FTC). That year, the FTC also issued a report stating consumers said they lost nearly $488 billion to such nefarious ploys.
Discovering tax-related theft of your identity could take awhile — as the FTC explains:
“If someone uses your SSN to file for a tax refund before you do, here’s what happens: When you file your return, IRS records will show that someone else has already filed and gotten a refund. If you file by mail, the IRS will send you a notice or letter in the mail saying that more than one return was filed for you. If you try to efile, the IRS will reject your tax return as a duplicate filing.”
“If someone uses your SSN to get a job, the employer may report that person’s income to the IRS using your SSN. When you file your tax return, you wouldn’t have included those earnings. IRS records will show you failed to report all your income. The agency will send you a notice saying you had wages that you didn’t report. But the IRS doesn’t know those wages were reported by an employer you don’t know, for work performed by someone else.”
Protect yourself from tax-return identity theft
Here are some tips:
Protect your personal information. Memorize your SSN, and leave your card at home. Before entering sensitive personal information into any website, make sure the site is legitimate (for more information, see Cardan Capital Partners’ series about cybersecurity, including phishing emails and password protection). Store tax records in a secure location, and shred banking and tax documents you don’t need. Don’t give your private information, including your SSN, to any business just because it asks. Divulge this information only when absolutely necessary.
Interact only with official correspondence. IRS notices about tax-related identity theft are sent only by postal mail. The agency does initiate contact with a taxpayer through email, text, social media or a phone call seeking personal or financial information. As the FTC notes: “The IRS also does not call taxpayers with threats of lawsuits or arrests. And, the IRS will never ask you to wire money, pay with a gift card or prepaid debit card, or share your credit card information over the phone.”
If you receive an email, text, or other electronic message claiming to be from the IRS, do not reply or click on any links. Instead, forward it to firstname.lastname@example.org. Also report IRS imposters at https://identitytheft.gov. If you receive a call from someone claiming to be with the IRS, hang up.
Be familiar with common scams targeting people for their money and/or identity. The crooks are constantly evolving their schemes. Guard against them by checking in on the consumer information section of the FTC’s website. Visit https://www.consumer.ftc.gov.
File your taxes early. If you’ve already filed, a crook with your Social Security number will have a much tougher time using it to file a fraudulent tax return and claim your refund.
How to address tax-return identity theft
If you receive in the mail a notification from the IRS stating that someone used your SSN to get a tax refund or detailing another problem, respond quickly, and follow instructions in the letter. Call the IRS using the telephone number given in the letter — and have the letter and your previous year’s tax return handy because you will need both to verify your identity. For more information, see the IRS’ guide, “IRS Identity Theft Victim Assistance: How It Works.”
If you have not received a notice from the IRS and suspect someone may have used your SSN to file for a tax refund, visit IdentityTheft.gov to file a report with the IRS and FTC simultaneously and to get a recovery plan. You will need to complete and submit an IRS Identity Theft Affidavit (IRS Form 14039) so that agency can begin to resolve your claim.
File your tax return, and pay any taxes you owe. If you cannot file a return electronically, you may need to mail it in.
Try to limit potential damage from the identity theft. Put a fraud alert on your credit reports. Order your free credit reports, and check them for accuracy. Close any new accounts opened in your name. Also consider placing a credit freeze on your credit reports.
General Disclosures: The content contained in this article represents the opinions and viewpoints of Cardan Capital Partners only. It is meant for educational purposes and not meant for consumer decisions. All expressions are as of its publishing date and are subject to change. There is no assurance that any of the trends mentioned will continue in the future. Market performance cannot be predicted, so nothing in our commentaries is ever meant to provide any kind of trading advice or guarantee of future results. Certain information contained herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. Any reproduction or distribution of this presentation, as a whole or in part, or the disclosure of the contents thereof, without the prior consent of Cardan Capital Partners, LLC, is prohibited.