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Identity theft has many faces, which can make it difficult to know what's going to happen if someone gets their hands on your personal information.
One of the more pernicious forms of identity theft is tax identity theft, which can go undetected until you try to file your state and federal taxes. Victims of tax identity theft may experience a delay getting their refund, and it also may be a sign that their identity is vulnerable in other ways.
If you're a victim of tax identity theft, or you worry you might be, here's what you need to know.
What Is Tax Identity Theft?
This form of tax fraud occurs when someone uses your Social Security number (SSN) and other personal information to file a fraudulent tax return in your name. The fraudster's goal is to obtain a tax refund payment before you or anyone else notices.
You may not find out that you've been victimized until you go to file your return only to get an error saying it's a duplicate. The IRS won't let you re-file if someone has already used your SSN to file a return, and you'll need to work with the agency to make sure your taxes are legitimately squared away.
Other potential signs that someone has stolen your information to commit tax fraud include:
- The IRS sent you a letter about a suspicious tax return.
- You received a tax transcript in the mail, but you didn't request one.
- You got a notice that someone accessed your IRS online account or someone created a new account in your name.
- The IRS shows that you received income from a source you don't recognize.
- You received a notice from the agency that you owe additional tax or need to offset an old tax refund you weren't due.
- The IRS has sent you a notice of collections for a year for which you didn't file a return.
When you first discover that something is wrong, stay calm and don't take any drastic actions. The IRS has policies in place to protect you from missing out on your tax refund, though it may take a little bit of time to sort things out.
What to Do if You're a Victim of Tax Identity Fraud
To get the IRS to help you resolve the situation and make things right, it's important that you follow the processes the agency has put in place for this scenario. Here are some steps you can take if you've tried to file your return and got an error due to a duplicate SSN.
- File your return. You still need to meet the filing and payment deadlines the IRS has set, even with fraud involved. If you can't submit your return electronically, file a paper return instead. And if you owe money based on your return, make sure to send the payment.
- Submit an affidavit. Before you send your paper return, print and fill out Form 14039, Identity Theft Affidavit. You'll need to include this form with your return.
- Wait for a response. The IRS will notify you within 30 days that it's received your affidavit. In some cases, the response may include a 5071C letter, which gives you instructions on how to verify your identity and prove that you filed your return.
- Get updated. Once the tax agency begins working on your case, it typically takes 120 to 180 days to resolve it. In some situations, though, it can take longer than that. During the process, the IRS may flag your account, which could protect you from future fraudulent filings. The agency may also review previous returns to make sure they're also in order. Request regular updates throughout the process so you know that things are going smoothly.
If you haven't yet filed your tax return but have received a notice or some other communication from the IRS that could indicate fraud, contact the IRS directly as quickly as you can.
Other Steps to Take After Tax Identity Theft
Dealing with the IRS is an important first step in this process. But if someone has your SSN and other personally identifiable information, they could also commit fraud in other ways. Here are some other actions you can take to stop the damage:
- File a complaint with the Federal Trade Commission (FTC). The FTC offers assistance to consumers who have been victims of identity fraud. File a report through IdentityTheft.gov, and you'll receive a recovery plan, including guidance throughout the process.
- Review your credit reports. If someone has your SSN, they may also try to open fraudulent credit accounts in your name. Visit AnnualCreditReport.com to get a copy of your report from each of the three credit reporting agencies (Experian, TransUnion and Equifax). Then review them to make sure you recognize all of the accounts. If you find one you don't, you can file a dispute with the credit bureaus.
- Request a fraud alert or security freeze on your credit reports. When you request a fraud alert, creditors will see the notice and try to contact you at the number you provided to verify your identity. In contrast, a security freeze prevents potential new lenders from reviewing your credit reports entirely unless the freeze is lifted. Review the differences between fraud alerts and credit freezes to determine which is the best course of action for you.
- Contact the financial institutions you currently do business with. If someone has access to your personal information, they may try to gain access to your financial accounts. Reach out to your bank or credit union and credit card companies to notify them that you've been a victim of fraud. Among other things, they may change your account numbers and login information to make it more difficult for fraudsters to take advantage.
Hopefully, the fraud that's been committed in your name is limited to what you've already discovered, but taking these steps can help prevent further problems that can make your life even more stressful.
How to Prevent Future Tax Identity Theft
While the IRS is working on addressing your situation, there are other steps you can take to prevent the fraud from happening again:
- Request an IP PIN. An identity protection personal identification number (IP PIN for short) is a six-digit number you'll receive each December for the current tax year. When you file your return, the IRS will require this number, making it impossible for someone else to do it before you do.
- File your tax return early. It may be tempting to wait until April to file your tax return, especially if you owe money, but identity thieves may bank on procrastination to file their fraudulent return before you get the chance. And remember, you don't have to pay at the same time you file. You just need to pay by the April 15 deadline. Also, if you're due a refund, getting that money sooner rather than later is a plus.
- Protect your tax ID. Whether you have an SSN or an individual taxpayer identification number (ITIN), it's crucial that you protect it at all costs. Keep your SSN or ITIN card safe at home in a secure location, and avoid giving it to anyone unless it's required and you're certain the company or transaction is legitimate.
- Check your credit often. Checking your credit report and score is not only a great way to spot fraud, but it can also help you improve your credit by showing you areas you need to address. Credit monitoring can also alert you to any changes in your credit, including possible indications of fraud.
- Browse securely. If you're on a public Wi-Fi network, such as the ones found in coffee shops and airports, avoid transmitting any personal information during your browsing session. If you have to, use a virtual private network (VPN) to encrypt your data. Also, anytime you're asked to submit private information online, make sure the website you're on is secure and legitimate. Secure websites have an address that begins with HTTPS, and this status may also be denoted in your browser with a closed padlock icon or the word "secure." Secure websites aren't susceptible to eavesdropping from hackers.
Unfortunately, it's impossible to prevent fraud completely, especially if companies you have accounts with suffer data breaches. However, taking these steps can make it more difficult for thieves to get and use your information nefariously.
Don't Procrastinate Your Response
Tax identity theft can be frightening, especially if taxes are already a point of stress and frustration for you. If you fall victim to a fraudulent tax return, don't delay taking action to address it. The sooner you respond, the sooner the IRS can start their process and the easier it will be to stop other forms of fraud the fraudster may commit.