Theft of our identity is a perpetual worry to us all. However, what is less publicized is the use of this information to commit tax fraud in your name.
The filing of false tax returns is a major issue for the IRS as well as those individuals whose identities are stolen. This is mainly the case because most people don’t have an understanding of the motivation for a criminal to file a fraudulent return. There are several incentives for these scam artists.
The most popular reason is to take advantage of refundable credits, such as the earned income credit, which is one of the most common targets. The criminals file a return before their target does, and then the refund check goes to a false mailing address. The taxpayer only becomes aware of the theft once they electronically file their return and it is rejected because the IRS’s records indicate that one was already filed.
If you find yourself in this position, the IRS has an “Identity Theft Affidavit” (Form 14039) which starts the process of your account being marked for suspicious activity. According to the IRS, an average case resolution is about 6 months, but can run longer.
There are some things that can help limit your exposure to identity theft. For one thing, know that the IRS never contacts taxpayers via email, phone, fax or social media. Any correspondence you receive in those media are “phishing” attempts. If you receive a tax notice, don’t ignore it. Instead, contact the IRS or related State Tax department directly. Always corroborate any contact numbers that may be listed on the notice with the respective government websites, such as www.irs.gov, or with a CPA, as part of your tax preparation checklist.
-Raymond Neubauer, CPA, Partner