United States

What to do if you are the victim of tax identity theft

Guidance to follow when your tax identity has been stolen

INSIGHT ARTICLE  | 

Taxpayers should familiarize themselves with the warning signs of tax identity theft and the steps they should take to minimize the effects of becoming a victim to identity theft. A common tactic that identity thieves use is to acquire a taxpayers' social security number (SSN) and file a phony tax return using the SSN, a fake Form W-2, Wage and Tax Statement, and in some circumstances, the taxpayer's actual name or address. The thief's plan is to receive an electronic tax refund or a paper check from the IRS before the taxpayer ever knows that his or her identity was stolen. This greatly complicates the tax filing process for the victim and can lead to a delayed tax refund or credit; which in many cases can take as long as 18 months.

Warning signs

Taxpayers may learn they have become victims of tax identity theft if they:

  • Received a letter from the IRS Integrity and Verification unit asking them to verify their tax return information or identity
  • Received a letter from the IRS informing them of a recently filed tax return for which more information is needed before it can be processed
  • Received an IRS notice that more than one tax return was filed using a single SSN
  • Received a letter informing the taxpayer they are eligible to receive an identity protection personal identification number (IP PIN) from the IRS website
  • Received a notice of tax due, a notice of refund offset of a notice from IRS Collection for a year in which they have not yet filed a return
  • Filed their tax returns online and there is a rejection code to the e-file submission or extension request
  • Became aware of IRS records that indicate they received wages from an unknown employer
  • Provided personal information to someone posing as the IRS via phone calls, e-mails, text messages, or other unofficial correspondence‒the IRS only initiates correspondence through mail and does not phone taxpayers or obtain information from them by email

Advice

Taxpayers who think they have become victims of tax identity theft should take steps to protect their identity, credit and tax filing status by.

  • Contacting the IRS Identity Protection Specialized Unit (1.800.908.4490) to confirm information relating to the warning signs above and to freeze your IRS tax account.
  • Filing Form 14039, Identity Theft Affidavit, with the IRS to begin an IRS investigation of the potential fraudulent filings using the taxpayer's identity. Filing this form will generally result in the issuance of an IP PIN which is to be used in addition to SSNs on the tax return. If a fraudulent return has been filed by an identity thief, the taxpayer should continue to file returns and pay taxes while the case is being investigated, even if that must be done on paper.
  • Contacting the three major credit bureaus (Experian, Equifax and TransUnion) and request a freeze to be placed on any new credit applications using their SSN or their spouse's SSN. The freeze can be temporarily lifted by the taxpayer, as needed. For those taxpayers who do not want to freeze their credit files, they could sign up for a reputable ID-theft-monitoring service.
  • Contacting their financial institutions and close any accounts opened without taxpayer permission or that have been tampered with.
  • Contacting the Federal Trade Commission's Identity Theft Hotline (1.877.438.4338) or local law enforcement to report fraudulent activity so that an additional investigation can be performed.
  • Checking Social Security Administration earnings statements annually to ensure earnings are reported correctly and benefits have not been paid to an unintended recipient.

For more information on how to reduce your risk, read the IRS Taxpayer Guide to Identity Theft.

Legislative efforts

In March 2015, the U.S. Senate proposed the Identity Theft and Tax Fraud Prevention Act of 2015 aimed at combating identity theft-related tax fraud. The bill is similar to those proposed for several years. As of March 2015, it was referred to the Committee on Finance. Its likelihood of passage is considered uncertain. Key provisions of the bill include:

  • Expansion of the existing IP PIN program to anyone requesting one (after the requesters identity has been verified)
  • Notification to taxpayers of the identity of criminally charged perpetrators of tax fraud schemes so that the victims can pursue civil action against the perpetrators
  • Implementation of measures to reduce identity theft at medical facilities including phasing out the use of SSNs for health care purposes
  • Allowing truncated SSNs to be used on Forms W-2 and prohibiting the display of SSNs on newly issued Medicare cards and communications provided to Medicare beneficiaries

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