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IRS Pays $5.2 Billion to Identity Thieves

The Internal Revenue Service estimates that it paid $5.2 billion in fraudulent identity theft refunds in the 2013 filing season, according to a Government Accountability Office (GAO) report.

This widespread problem — known as identity theft tax refund fraud — occurs when an identity thief files a fraudulent tax return using a legitimate taxpayer’s identifying information and claims a refund.

“Identity theft tax refund fraud is a persistent, evolving threat to honest taxpayers and tax administration,” the GAO reports.

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While fraudulent returns accounted for several billions of stolen dollars from the IRS in 2013, the agency believes it prevented $24.2 billion in additional fraudulent identity theft refunds. However, the IRS explains that it is difficult to accurately detect the full extent of the problem.

Identity thieves file fraudulent returns by taking advantage of the window between when you receive a W-2 from your employer (usually by the end of January but sometimes not until March) and when you file your tax return (by April 15). An identity thief quickly steals your identifying information, files a fake return in your name and then collects the refund check.

Since the IRS tries to issue each refund within three weeks of receiving a return, identity theft tax fraud is a difficult problem to flag and catch. However, there are some steps you can take to mitigate your chances of becoming a victim.

File Early and Electronically

The sooner you file after receiving your W-2 from your employer, the less likely an identity thief will successfully file a fraudulent claim in your name. That’s because once the IRS receives a return with your Social Security number, any duplicate filings will be rejected and you will be notified.

Filing electronically is also beneficial because the return is processed faster than if sent in the mail. Just be sure that you use a secure network when filing so hackers cannot interfere and collect sensitive information.

Have Tax Documents Delivered to a P.O. Box or Sent Electronically

This prevents an identity thief from rummaging through your mailbox and physically stealing important tax documents. However, if documents are sent electronically, be sure that you are always using a secure network.

Always Collect Your Mail Promptly

If there is no way around having your tax documents sent through the mail, be sure to make a habit of collecting your mail as soon as you return home. This lessens the likelihood that an identity thief will find and confiscate mail near your home.

Be Leery of Scams

Be careful of phone calls that claim to be from the IRS. The agency will never ask for credit card, debit card or prepaid card information over the phone. Some scammers have been known to use fake IRS badge numbers or recite the last four digits of a victim’s Social Security number. Some scammers also spoof the IRS toll-free number on caller ID to make it appear that the IRS is really calling. If you receive a suspicious phone call from someone claiming to be from the IRS, the agency urges you to hang up and call the IRS back directly at 1-800-829-1040.

Also be mindful of suspicious emails. The IRS says it will never email you to request sensitive information. It will also never text you or reach out to you using a social media channel. If you receive an email, text or social media message from the IRS asking for personal information, do not share your information and report the request to phishing@irs.gov.

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