With the new year approaching and tax filing season about to start, now is a good time to remind my clients and others about safeguarding their personal information so as not to fall prey to identity thieves.
In order to fraudulently file a tax return electronically, the only information an identity thief needs is your full name, social security number and date of birth, plus the same information for any dependents listed on the return. The thief then uses bogus earnings and other information to prepare the return and claim a refund, which will be issued by the IRS before any matching of W-2 information etc. can be done.
The majority of fraudulent tax returns filed by identity thieves are filed during the first two months of the year. The first the legitimate taxpayer learns about it is when they try to file their correct tax return, and it is rejected because the IRS shows a return has already been processed.
The taxpayer then has to file a correct paper return, explaining that the previous one filed was a fraud. At this time the IRS will issue a bill to the taxpayer for the amount of any refund issued to the thief. Fortunately, by following the correct procedures in reporting the identity theft, the legitimate taxpayer will not need to pay this, but as you can imagine it becomes a nightmare to sort out, and can cost the taxpayer if he or she needs to hire a tax representative to help with the resolution of the issue.
While I can certainly be hired help resolve the situation, I would much prefer that it does not happen to you in the first place.
To help avoid this situation, please remember not to give out any personal information to sources you do not know, and have not initiated contact with.
Below is an article I published earlier in the year, which deserves re-visiting at this time.
Reg Davies
Accounting & Tax Services of Charlotte
704-277-5681
RegDavies@CharlotteTaxGuy.com
www.CharlotteTaxGuy.com
Ten Things to Know about Identity Theft and Your Taxes
Learning that you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.
Many times, you may not be aware that someone has stolen your identity. The IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.
The IRS combats tax-related identity theft with a strategy of prevention, detection and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.
Here are ten things to know about ID Theft:
1. Protect your Records. Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for Internet accounts.
2. Don’t Fall for Scams. The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
3. Report ID Theft to Law Enforcement. If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.
4. Complete an IRS Form 14039 Identity Theft Affidavit. Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.
5. Understand IRS Notices. Once the IRS verifies a taxpayer’s identity, the agency will mail a particular letter to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.
6. IP PINs. If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. In 2014, the IRS launched an IP PIN Pilot program. The program offers residents of Florida, Georgia and Washington, D.C., the opportunity to apply for an IP PIN, due to high levels of tax-related identity theft there.
7. Data Breaches. If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft. Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.
8. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.
9. Combating ID Theft. Over the past few years, nearly 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft-related tax refund fraud grew to 43 months in 2014 from 38 months in 2013, with the longest sentence being 27 years. During 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft. Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed. So far this year, new fraud filters stopped about 3 million suspicious returns for review, an increase of more than 700,000 from the year before.
Courtesy of the IRS – IRS Summertime Tax Tip 2015-01
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