In 2014, tax identity theft topped the Federal Trade Commission’s (FTC’s) list of identity theft crimes. This year, Commonwealth’s Information Security team helped remediate well over 100 cases of identity theft by means of tax fraud. Moreover, the Internal Revenue Service (IRS) estimates that it will process $21 billion in fraudulent tax refunds next year.
To fraudulently file taxes, a thief just needs your name, social security number (SSN), and date of birth. From there, he or she can easily falsify “your” W-2 information in attempt to claim a refund. You, the taxpayer, won’t find out about the fraud until it’s too late and you receive notification that your actual tax return has been rejected.
How do criminals obtain the information to file taxes in your name? Cyber criminals obtain your personal information in a number of ways. Among the tactics they use are posing as an IRS representative and procuring information via phone or e-mail, sending phishing e-mails, stealing your W-2 from your mailbox, and stealing information over nonsecure Wi-Fi networks. Unfortunately, with tax fraud, your SSN has been forever compromised, which means that you’ll most likely have another identity theft issue in the future.
What do you do now? Unlike a credit card number, an SSN cannot simply be canceled and changed when it’s stolen. Therefore, it’s up to you to do all you can to protect yourself from the fraudulent use of your SSN going forward.
Notify the FTC, Social Security Administration (SSN), and the IRS. The faster you take action, the less damage will be done. In addition to filing a complaint with the FTC and notifying the SSA, call the IRS Identity Protection Specialized Unit at 800.908.4490 to report the theft.
Complete and submit a Form 14039. If you haven’t already done so, fill out IRS Form 14039, the Identify Theft Affidavit, so that the IRS is aware that your future returns may be at risk.
Apply for an Identity Protection PIN once you’ve been identified by the IRS as an identity theft victim. The IRS will provide you with a six-digit PIN that must be used for future tax returns in order for them to be accepted.
Notify one of the major credit bureaus. Report the fraud and place an alert on your credit report to one of the three major credit bureaus: Experian, TransUnion, or Equifax. When you file a report with one bureau, it is legally required to alert the other two. A fraud alert on your credit report will require potential creditors or lenders to contact you directly and obtain permission before opening a new line of credit.
Strongly consider purchasing credit monitoring to keep tabs on your credit report. Credit monitoring services will not only alert you when a new line of credit is attempted, but they will also monitor existing accounts and alert you of any changes. Many also offer recovery assistance services, monetary and legal assistance, and insurance that covers expert consulting regarding identity theft, as well as financial relief.
Stay vigilant It’s possible that you won’t encounter another issue of identity theft, but you should still stay aware. The situation may run its course and go away for a couple of years, but you more likely than not will have another issue considering that your SSN is in the hands of at least one identity thief. Credit monitoring will help you keep tabs on your credit. In addition, starting with the 2015 tax year, file your taxes as soon as possible to avoid a fraudulent filing again. Finally, remember that the IRS will never contact you electronically and almost never via phone. It always communicates via letters through the U.S. Postal Service. If you do receive a phone call from someone saying that he or she is from the IRS, hang up and call your local IRS office directly.