Tax identity theft is one of the most devastating and evasive forms of identity theft. It can go unnoticed until the IRS notifies victims that there is something wrong with their tax returns.
Tax identity theft occurs when a person illegally files a tax return under another person’s name to claim that person’s tax benefits or return. This type of identity theft is common because many people wait to file their taxes until the end of tax season, which provides criminals with an open window to file fraudulent tax returns early. For tax identity theft to occur, a person’s social security number is needed. Unfortunately, it can be rather simple to steal a person’s social security number. For instance, a criminal could steal a social security number via online scams, home break-ins, physical purse or wallet theft, phone scams, medical institutions, workplace hacks, etc. Tax identity theft most commonly takes place when a criminal files a tax return using another person’s social security number as well as a fraudulent W-2 form. Combining the social security number and the W-2 form will result in a larger sum of money for the tax return. This ensures that the thief gets the most out of their victim’s return. In 2013, the IRS paid approximately $5.8 billion for fraudulent tax returns. Luckily, the frequency of tax identity theft has dropped as the IRS has taken more aggressive precautions like assigning qualified personnel to focus on fighting tax identity theft.
Tax identity theft is no small crime. Not only can criminals file a fraudulent tax return with a stolen social security number, but they can also commit other identity theft-related crimes like misusing a person’s credit card account. Although other identity theft crimes are serious, tax identity theft is one of the terrifying forms of identity theft because of potential financial losses, significant stress, and overall conflict with the IRS over future tax returns. The IRS does not take the tax process lightly, so if something is wrong with a tax return, whether that be a person’s filing mistake or a case of tax identity theft, they will make sure they get answers.
You may have your own suspicions, but to know for sure if you are a victim of tax identity theft, you must await a notice sent by the IRS telling you that there is something wrong with your tax return. When you get this notice by mail, there are a few steps that you should take:
Some warning signs of tax identity theft you should be aware of, according to the IRS, include the following:
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Here are a few precautions you can take to prevent becoming a tax identity theft victim in the future:
Although the IRS is improving its ability to stop tax identity theft, tax identity theft continues to be a major issue in the United States. Tax identity theft is tough to catch and recover from. This makes it one of the most worrisome forms of identity theft. However, if you notice the warning signs and follow the steps outlined above to report tax identity theft, you will have a better chance to make a full recovery. In general, identity theft is an issue that plagues millions of people each year. Knowing what precautions to take to prevent tax identity theft and general identity theft may be your best chance to stay secure in the future.