Tax Return Identity Theft – Read before Tax Filing Season!

EPF Last Update: June 7, 2020

Ever get warned about identity theft risks during tax season?

You should be worried, as the IRS receives billions of dollars in fraudulent tax returns each year!

There’s quite a bit you should know, about tax return fraud and how it should be reported, so buckle down and dig in …

What is The Definition of Tax Return Identity Theft?

‘Tax return identity theft’ is the act of committing identity theft by fraudulently filing someone else’s tax return.

This is done on a regular basis; the IRS has claimed to have stopped over $63 billion in fraudulent tax returns in just a three-year period.

The hard part is that anyone can become a victim, and all a thief has to do is steal your mail to get your information. This is why people emphasize on mail security as a single piece of stolen mail can leave you a victim.

How Does Tax Return Identity Theft Really Work?

The fraudster typically approaches this scheme in one of two ways:

By using their personal information to fabricate a tax return, while directing the refund to their ‘drop’ address or into a fraudulent account.
By using their Social Security Number to seek out employment, and to subsequently file their tax return in the victim’s name.

The majority of cases do not involve people impersonating others to work.

However, it is understandable that some identity thieves will take this approach as it gives them the opportunity to avoid their liabilities. If they have a court ruling against them, if their wages have been garnished, or otherwise, they might choose to impersonate.

The more worrying thing is that … a fabricated tax return can happen to anyone!

How Do These Fraudsters Get Your Information?

Knowing is half the battle, and once you are aware of what information is collected and how they get it — you will be able to protect yourself more!

What Types of Information are Collected?

When it comes to tax return fraud and identity theft, the fraudster will typically seek out the following information:

Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)

With your SSN or ITIN number, an identity thief can present an effective personal identifier to any government agency in hopes of victimizing you. This can work for many identify fraud scenarios, especially if the thief has your full name and date of birth as well.

  • Employment Identification Number (EIN)

Think of EIN numbers as SSNs for businesses; with just the EIN, the business’s legal name, and their physical address, pulling off identity fraud is made easy. In fact, with these credentials a fraudster could submit a fake tax return under the business’s identity.

  • U.S. Passport Number

A passport number can be used to obtain other pieces of information about a potential victim. If the passport card gets into the hands of an identity thief, the possible fraud scenarios are virtually endless.

  • State Driver License Number

This works like your passport number, except it can be used to access a greater amount of personal identifying information. With this number, details on the victim’s appearance, their birth date, physical address, and full name will all be obtainable. When put together, it makes filing a fraudulent tax return easy.

How Does This Information Get Collected?

There are endless ways an identity thief could get your personal identifying information. Historically speaking, some of the more common techniques include dumpster diving, mail theft, and phone call scams.

Unfortunately, the world has evolved a lot in the past decade and there are now many new ways for criminals to steal data. Most obviously, the Internet has made a lot of these opportunities accessible to just about anyone and everyone in the world.

So, an individual could get targeted through the Web. If their e-mail, PayPal, or social media account gets compromised, sensitive information could get revealed. The fraudster just has to piece together a few parts of the puzzle, then they can fabricate a tax return under you.

Prevent Identity Theft by Avoiding Database Hacks

Databases get breached on a regular basis, and this is especially true online. This is why you need to minimize the risk of ending up in one of these leaks. This is true for both securing your login credentials and your payment information.

A very effective way of doing this is by using a password manager (ex. LastPass) to control your online passwords. This allows you to choose a lengthy and hard-to-crack password for each and every account. If a security breach occurs on a site you visit, your log-in credentials will not need to be changed all around the board. Plus, you do not have to remember dozens of login details in order for the credentials to stay unique.

Of course, that alone will not be enough to stop your information from getting leaked if the right website gets hacked. This is why you need to be careful about what you enter about yourself on the Web.

As an example, in Canada one of the leading home phone, television and Internet providers is Rogers. This company allows you to sign up for services through their website, by the phone, or with a live chat worker. If you go the live chat route, you are prompted with a text form to fill out that includes your Social Insurance Number (Canada’s SSN equivalent).

Entering your information through this live chat, or any other online form, breeds many potential risks. Your information could get stolen by a live chat operator — potentially someone who was outsourced and works remotely. Your details might be leaked if the website gets hacked; if your computer is infected by a key logger, your SSN will be out in the open.

It really isn’t easy to protect yourself in every way possible; here are five quick and simple ways you can try to stop tax return identity theft from affecting you!

Fast Ways to Prevent Tax Return Identity Theft

  • Stay educated

Not all the database leaks are at the corporate level; millions upon millions of Americans have had their identities stolen through federal and state level database hacks. More often than not, these were inside jobs and involved employees misusing their security privileges. However you always have to be alert; in 2015, hundreds of thousands of tax returns were stolen when the IRS’s website was compromised.

  • Use digital wallets

Whether you want to use PayPal, Bitcoin, or even Google Wallet, killing the direct connection to your credit card is a good thing. You no longer reveal highly sensitive details about yourself — for example, Bitcoin allows you to make payments through alphanumeric wallet IDs. This means, whether it’s Amazon or a potentially scamy Chinese clothing site, placing an order does not equate to giving up your personal security.

  • Safeguard your mail

It is sickening how dedicated criminals are to getting what they want, and this is especially true when it comes to the thieves that steal mail. It is easy enough for a fraudster to follow a mail truck around; if they plan it out ahead of time, it’s easy to pre-determine a more profitable target. If you have your own office, the transmission of mail within your building should also be considered.

  • Destroy your old documents

All it takes is a single number on just one document, from even 20 years ago, for a fraudster to have the keys to your identity. This means you absolutely must dispose of your mail and paperwork in a proper fashion. Throwing it into the garbage is not enough — in fact, it is a dangerous idea for students and business executives. You should invest in a paper shredder or burn the papers in a fire to make sure it is effectively discarded.

  • Take action against suspicious activity

Any signs of tax return fraud should be reported right away to eliminate personal liability. There are about half a dozen different forms relating to tax return fraud.


The same things that have made America great have shaped the nation’s biggest weakness. As credit cards, loan accounts, and more, became abundantly available, it was clear fraudsters would use this information for harm. The government has not been able to keep up with the various ways these fraudsters work; the addition of IT security risks, and all the recent data breaches, is especially alarming.

As such, you cannot make the assumption that your identity is safe and sound. You have to take matters into your own hands and protect yourself now. There will be help from the government, and you can eliminate liability, if you become a victim, but prevention is the answer.

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