Computers and the Internet have become mainstays in virtually every area of American life in the 21st century. There are tremendous benefits and conveniences to this, of course, but there are also some downsides — such as the increased risk of identity theft that arises as we share more of our personal information online.
In fact, identity theft has been called “the crime of the 21st century,” consistently ranking at the top of the Federal Trade Commission’s list of complaints every year. While there are many ways for identity thieves to strike offline, the Internet has made it that much easier for them to steal sensitive personal information from unsuspecting and careless individuals online.
A New Kind of Identity Theft
With tax-filing season now coming up, there’s another kind of identity theft you should be watching out for: tax identity theft. In this scheme, identity thieves enter stolen personal information (primarily Social Security numbers) on fraudulent tax returns that claim tax refunds. They then cash the refund checks themselves, leaving the victims spending weeks or months trying to clear up the confusion with the IRS and get their own legitimate tax refunds.
On its website, the FTC states that tax identity theft accounted for more than 43 percent of all identity theft complaints in 2012 — almost three times the percentage of complaints (15 percent) from just two years earlier. This makes tax identity theft “the largest category of identity theft complaints by a substantial margin,” the FTC notes.
Recent news reports have featured a number of stories highlighting the different ways that thieves have stolen personal information from victims and used it to commit tax identity theft. For example:
- A part-time data entry clerk stole tax returns she was working on and used the information to file fraudulent tax returns requesting large refunds.
- An employee at a collection agency stole the personal information of debtors and then sold it to professional identity thieves, who used it to file false returns seeking fraudulent refunds.
- A woman who worked as a customer service rep for a student loan processor gave the personal information of student loan borrowers to a tax preparer, who in turn used the data to file fraudulent returns requesting large refunds.
Steps to Take
The next couple of months are prime time for tax identity theft, as millions of individuals file their personal tax returns leading up to the April 15 filing deadline. Here are some precautions to help protect yourself, as well as steps to take if you believe you have been victimized:
- Read any IRS notices you might receive very carefully. It’s likely that any mail you receive with a return address that begins “Internal Revenue Service” is going to get your attention, but you should pay especially close attention to these due to the heightened risk of tax identity theft.
If a thief uses your Social Security number to obtain a fraudulent tax refund or a job, you will likely receive a notice from the IRS telling you that you were paid by an employer you don’t recognize, that you under-reported your income, or that more than one tax return was filed using your Social Security number. Any of these scenarios is a strong indication that you may be the victim of tax identity theft.
- Don’t reply to any emails, texts or social media messages asking for your personal information. The IRS will never initiate contact with you in this way to ask for your Social Security number or any other sensitive personal information. Don’t reply to or click on any links in any kinds of messages like this; instead, forward the message to the IRS at email@example.com so they can investigate it further.
- Contact the IRS immediately if you are suspicious of fraud. If you encounter any of the scenarios described above, call the IRS at (800) 908-4490 to report the potential fraud. Trained specialists will help you sort out the mess, get your tax return filed properly, and receive any legitimate refund you are entitled to, as well as help you guard against becoming a victim again in the future.
- Take additional steps to limit the potential damage of identity theft. After you have talked to the IRS and worked with them to clear up any issues with your tax return and refund, file an identity theft complaint with the FTC and a police report with your local police department.
Also put a fraud alert on your credit reports so that businesses must contact you to verify your identity before issuing credit in your name. Simply contact any one of the three major credit-reporting bureaus (TransUnion, Equifax or Experian) and they will alert the other two bureaus about your fraud alert.
Like any swindle, it is always better to take steps to prevent identity theft from happening than to react to it after the fact. Do your best not to become a victim, and then act quickly to rectify the situation if you do.
If you would like to prevent identity theft, check out our credit monitoring service.