Identity Theft Is Real

By Jim Newell

You have completed and filed your tax return in a timely manner. Then your tax preparer calls with the news that the Internal Revenue Service has rejected your return because someone has already filed a return using your name and Social Security Number. Or maybe the Internal Revenue Service has contacted you directly asking you about unreported income, and you haven’t even filed your return yet.

You wonder how is this possible?

This form of ID theft occurs when a scam artist files a phony tax return–in your name, with your Social Security number and other personal information–in an attempt to collect a fraudulent refund.

These con artists create phony businesses, phony kids, make up phony work hours and other deductions and get a very nice refund, and sometimes from multiple identity theft victims.

If you are one of those victims, it can take months of trying to work with the Internal Revenue Service bureaucracy to get to the bottom of, and your tax return will be held hostage until it is cleared up

How does this form of Identity Theft happen?

Many times it starts with an email “phishing” scam. In this kind of scam you receive an email that appears to be from a legitimate financial institution, or government agency. Consumers are asked to supply their Social Security number, and other personal information which the con artist will use to generate the W-2 and a phony tax return.

In other cases, phony returns have been filed using children’s Social Security numbers.

Growing numbers of victims are complaining to the Internal Revenue Service and the Federal Trade Commission about this and similar scams.

Phony tax return emails rank third in the Internal Revenue Service’s list of the “Dirty Dozen” tax frauds this year.

Tax scams always have been a problem but have become more sophisticated with the Internet.

According to the Federal Trade Commission complaints about tax return identity theft have risen more than 150%. Complaints to the Internal Revenue Service Taxpayer Advocate are up over 640% in three years.

Victims discover the problem after getting a startling notice from the Internal Revenue Service asking about unreported income. But here are a few common-sense tips that may reduce your chances:

• Beware of phony emails that appear to be from the Internal Revenue Service, or other financial institution. You might be asked to click on a link in the email to get a special claim form or other document, which asks you for personal information. All legitimate financial institutions will not send email asking you to provide information directly, rather they will ask you to contact then by phone or a secure link that you already have. The Internal Revenue Service says it “does not send unsolicited email about tax account matters” to individuals, businesses, tax-exempt groups or others.
• Never give a business or service provider your Social Security number unless you have determined that it is absolutely necessary, and they have assured you that they have taken precautions to keep it secure.
• Check with your employer to see what steps they employ to restrict access to your Social security number and other private personal information.
• Your tax preparer will have access to all of your personal financial information. Be sure to check them out. Make sure they use updated anti-spyware and anti-virus software on the computers they use for tax work.
• If you file your own returns electronically, make sure to use only services linked directly to www.irs.gov. For state returns be sure you use links directly from your state’s official home page.
• If you get a written notice from the Internal Revenue Service, respond as soon as you can to the name and number included in the notice.