If you’ve received a notification in the past year that your personal information, including your Social Security Number and date of birth, was pilfered in a data breach — you may be getting a queasy feeling in your stomach as tax season arrives. And with good reason. To file a phony tax return, crooks only need your SSN and DOB. That’s it! They don’t even have to get your name right.
The crime is ridiculously easy. The thief buys a VISA or American Express prepaid card at the store, files a fake return online, and a week later the fraudulent refund is transferred to the card. The card can be used in an ATM, so the refund is quickly converted to cash and the card is thrown away.
While the U.S. Department of Justice (DOJ) is working diligently to catch and prosecute identity thieves who file false income tax returns, billions of dollars is stolen every year. When the fraud is discovered, the taxpayer whose ID was stolen has to untangle the web of deceit.
The IRS reports that it typically takes 6 months to resolve the issue. Wifredo Ferrer, United States Attorney for Southern Florida, told 60 Minutes last fall that the process is a nightmare, “I have seen cases of individuals who have almost lost their businesses because they did not get their refund check in time. I've seen individuals who have almost lost their place in a nursing home because they needed that refund to pay for that year's worth of services. And it's a real shame. A real shame.”
The most recent, audited data — released by the U.S. Government Accountability Office (GAO) on Sept. 22, 2014 — shows that $5.2 billion was stolen through fraudulent tax returns in 2012. Another $24.2 billion in theft was blocked. According to the IRS, it stopped more than $50 billion in fraudulent refunds from 2011–2013.
You can be proactive in preventing tax refund fraud. If you think that you may be vulnerable because of a lost or stolen SSN, phone the IRS Identity Protection Specialized Unit at 800-908-4490 (Monday - Friday, 7 a.m. - 7 p.m. local time; Alaska and Hawaii follow Pacific time). Since the first day to file your 2014 return is Tuesday, Jan. 20, 2015, before many taxpayers even get W-2 forms from their employers, it’s a good preemptive step.
The deadline is not until Feb. 2, 2015 for employers to mail out Form W-2 to employees and for businesses to furnish Form 1099 statements reporting, among other things, non-employee compensation, bank interest, dividends, and distributions from a retirement plan.
7 Tips for Legitimate Tax Filers
- File your tax return early in the tax season, before identity thieves do. If you owe tax, you can still file the return early and then wait to send your payment until April 15.
- Use a secure Internet connection if you file electronically. Don’t use unsecure, publicly available Wi-Fi hotspots at places like coffee shops or a hotel lobby.
- If you mail your return, take it directly to the post office. Do not leave it in your mailbox or your employer’s outgoing mail slot.
- Shred copies of your tax return, drafts, or calculation sheets you no longer need.
- Get recommendations and research a tax preparer thoroughly before you hand over personal information.
- Know the IRS won’t contact you by email, text, or social media. If the IRS needs information, it will contact you by mail.
- Respond to all mail from the IRS as soon as possible.