What Is Tax-Related Identity Theft and How Can You Recover From It?
Tax-related identity theft happens when someone uses your Social Security number to fraudulently receive your tax refund. You may not discover you’re a victim of this crime until you try to file your legitimate tax return online or by mail and the Internal Revenue Service lets you know a return has already been filed in your name.
And so the trouble begins.
Here’s the problem: If you are a victim of tax-related identity theft, it can take longer to get your refund. Plus, the criminal who filed the return using your personal information still has that data. You could remain a target for other identity-related crimes.
In this article, you’ll learn some of the warning signs of tax-related identity theft, how to help protect yourself, and what to do if you become a victim.
5 warning signs of tax-related identity theft
It almost always comes as a surprise to find out that you’ve been a victim of tax-related identity theft. Here are five red flags.
- Your e-filed tax form is rejected.
- The IRS or your tax preparer tells you more than one tax return has been filed using your Social Security number.
- The IRS mails you a letter saying a suspicious return has been filed using your Social Security number.
- Your IRS record shows you were paid by an employer you don’t know. Why? Someone may have used your Social Security number to get employment. The employer reported subsequent income to the IRS.
- The IRS mails you a notice that you owe additional tax for a year you didn’t file a tax return.
How to report tax-related identity theft to the IRS
Are you the victim of tax-related identity theft? Be sure to report this crime to the IRS.
You do this by completing IRS Form 14039, Identity Theft Affidavit. You can find this form here. After filling out this form, file it with your tax return. If you are the victim of tax-related identity theft, you might not be able to file your taxes electronically. Make sure, then, to submit your 14039 form and tax returns by paper filing.
You should also report this identity theft to the Federal Trade Commission and contact the three national credit bureaus of Experian, Equifax and TransUnion to place a fraud alert on your credit reports.
Identity Theft Victim Assistance
Once you report your issue, the IRS will send you an acknowledgment letter stating that it is investigating your case. The IRS will then send your case to its Identity Theft Victim Assistance organization. On its web page, the IRS said it will usually resolve your case within 120 days.
The Identity Theft Victim Assistance organization will first determine how many of your tax years have been impacted by your case. The organization will then research the case to check whether specific names, addresses, and Social Security numbers are accurate or fraudulent.
What happens after you report identity theft to the IRS
After the IRS finishes its investigation, the agency will properly process your real tax return. It will then remove the fraudulent return from your tax records. To close its work, the IRS will mark your account with an identity theft indicator, something that should provide you with additional protection in the future.
Here’s a checklist from the IRS outlining exactly how this process works.
- If you receive a notice from the IRS claiming that there are multiple tax returns filed in your name, respond quickly. Call the number that’s included with the notice.
- Complete IRS Form 14039, Identity Theft Affidavit, in two cases: Your e-file tax return is rejected because of a duplicate filing under your Social Security Number or the IRS sends you a letter instructing you to fill out this form.
- Here’s how to fill out the form: First, fill out the fillable online form at IRS.gov. Print and attach that form to your paper tax return. Mail the forms according to the instructions from the IRS.
4. If you owe the IRS any money, pay your income taxes as you normally would.
The FTC recommends taking these steps after identity theft.
- Go to identitytheft.gov to file a complaint with the FTC.
- Contact the three major national credit bureaus — Equifax, Experian and TransUnion — to place fraud alerts on your credit records.
- Contact your bank and other financial companies. Close any accounts opened without your permission. Also, close accounts that show any suspicious activity.
Check with your state tax agency
The IRS recommends, too, that you check with your state tax agency to see if someone has filed a fraudulent report with that agency. You can view a list of state tax agencies here.
Additional steps to protect your identity
You should always remain vigilant about protecting your identity, even if you haven't fallen victim to a tax-related fraud.
This means installing quality security software on your computers and other devices. This software will lower the chances that a criminal could infect your machines with viruses or malware that might record your key strokes and expose passwords or other personal information that makes identity theft possible.
Be aware of phishing emails, too. These emails, supposedly sent by banks, credit card companies, vendors, or other financial institutions, might ask you to provide sensitive information such as your Social Security number or bank account numbers. They might also ask you to click on a link that will take you to a website asking for the same information. Delete these emails and never respond to them. Your bank or credit card provider will never ask you to provide your Social Security number or account numbers in an email.
Protect yourself against tax-related identity theft
Tax-related identity theft is a specific danger. Still, you’ll use many of the same tactics to help protect yourself as you would for other types of identity theft. Here are some tips.
- Guard your Social Security number. Provide it only when necessary. And keep your Social Security card in a secure place.
- Keep your tax records secure.
- Use strong passwords and change them periodically.
- Make sure your computer devices have security software with firewall, malware, and anti-virus protections.
- Learn how to recognize scams and other attempts to steal your personal information. These include phishing emails and calls and texts from impostors posing as representatives of your bank, your credit card company, or the IRS.
- Depending on your circumstances, you might also be able to receive an Identity Protection PIN from the IRS. This is a six-digit number designed to keep taxpayers' Social Security number out of the hands of criminals. When filling your tax returns, you'll use this six-digit number instead of your Social Security number. Not everyone is eligible for one of these numbers. If you are a victim of identity theft and you've contacted the IRS about fraudulent returns, the agency will mail you a notice with your Identity Protection PIN. You can also opt-in for one of these numbers if you filed a return last year as a resident of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Maryland, Michigan, Nevada, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, Texas or Washington.
Tip: No one wants to have their tax refund delayed, but tax-related identity theft will likely slow down the process. If you’ve done everything right and contacted the IRS, but still don’t have a resolution, here’s what to do: Call the IRS’s special assistance number at 1-800-908-4490.