Tax identity theft happens when someone uses your personal information to file a tax return, claiming the fraudulent returns are yours. You might think you’re in the clear because you report income from wages and other sources, but this is where the trouble starts. The IRS will use algorithms that include common patterns of data matching to identify a pattern of possible fraud. Here are some ways to avoid an identity theft scam and what to do if you find yourself in one.
With the three simple ingredients of a name, birth date, and social security number, someone can commit tax fraud by filing their own return with your information. This results in delayed or stolen refunds for you. While swiping an extra refund may seem like a worst-case scenario, thieves can also use your personal information to obtain employment as well. This is possible because when someone uses another’s identity for employment purposes they have to report all income earned under that SSN on their taxes as well as any unclaimed earnings if those are imposed upon them. The IRS will flag such returns as suspicious and financial implications may occur if taxes are not remitted soon enough or audited by the IRS due to these missed payments.
Tax identity theft happens when someone uses your personal information to file a tax return, claiming the fraudulent returns are yours. You might think you’re in the clear because you report income from wages and other sources. But this is where the trouble starts. The IRS will use algorithms that include common patterns of data matching to identify a pattern of possible fraud. The most common tax identity theft scams are when someone else claims to be:
- A taxpayer with no income
- An individual who has died
- A business that doesn’t exist
- A corporation that is not registered to file taxes
- Someone else’s taxpayer who shares the same name as you
- More than one tax return was filed and your return was rejected.
- Consumers have a balance due, refund offset, or have had collection actions taken against them.
- IRS records say that you received more wages than you actually earned.
- If someone uses your SSN to get a job, the employer may report that person’s income to the IRS using your SSN. IRS records will show that you failed to report all your income and the agency will send you a notice saying that you have wages you didn’t report.
- State or federal benefits reduced or canceled due to the agency involved receiving information reporting a change of income.
- A random letter arrives from the IRS that does not appear to apply to you.
If you’ve been targeted by one of these types of scams, contact the IRS so that they can investigate it further. You should also contact your state revenue office or the state attorney general’s office.
Ways to Get Help If You Find Yourself In A Tax Identity Theft Scam
If you think you’re a victim of tax identity theft, there are steps you can take to make sure your personal information is protected. If you find yourself in a tax identity theft scam, try these options below:
- Report the crime: If you’re a victim of tax identity theft, report it to the IRS and the Federal Trade Commission (FTC).
- File your taxes: File your taxes on time and make sure that everything is done correctly. Remember that filing electronically is always recommended because it’s the fastest and most secure way to do so.
- File for an extension: If you owe taxes, file for an extension if possible to prevent late penalties from being applied to your account and preventing interest from accruing if you have been involved in tax identity theft.
- Review your financial documents: Double check all of your financial documents over again and make sure they haven’t been tampered with or altered by someone else who has access to them.
- Contact your bank and credit card companies: Contact both any bank or credit card company that issued cards in recent years and inform them of what happened to their existing accounts or potential fraudulent charges on new accounts that may have been opened using stolen information.