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Protecting Taxpayers from Identity Theft and Refund Fraud

September 12th, 2016

The IRS has formed a coalition of tax software companies, payroll companies, tax practitioners and other stakeholders to combat the proliferation of identity theft and refund fraud. The Security Summit Initiative was formed to identify new safeguards that will better protect taxpayers.

Identity theft occurs when someone steals your social security number in order to file a tax return claiming a fraudulent refund. Unfortunately, you may be unaware that this has happened until you have filed your tax return and receive a notification that a tax return has already been filed using your social security number. The IRS may also send you a notice that they suspect fraudulent activity using your social security number.

Remember, the IRS will never call to threaten you, demand immediate payment or that they will send the police to arrest you. The first point of contact will always be a notice from the IRS of any outstanding tax liability or unreported income on your tax return. Be sure to forward any notices you may receive to our office to determine if the notice is authentic and to research the discrepancy or the information requested.

The IRS has provided the following course of action if you should find yourself the victim of identity theft:

Know the Warning Signs

Be alert to possible tax-related identity theft if you are contacted by the IRS that:

  • More than one tax return was filed using your social security number.
  • You owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a tax return.
  • IRS records indicate you received wages or other income from an employer for whom you did not work.

Steps to Take if You’re a Victim

If you are a victim of identity theft, the Federal Trade Commission recommends these steps:

  • File a complaint with the FTC at identitytheft.gov.
  • Contact one of the three major credit bureaus to place a fraud alert on your credit records:
  • Contact your financial institutions, and close any financial or credit accounts opened without your permission or tampered with by identity thieves.

If your social security number is compromised and you know or suspect you are a victim of tax-related identity theft, the IRS recommends these additional steps:

  • Respond immediately to any IRS notice; call the number provided or, if instructed, go to irs.gov.
  • Complete IRS Form 14039, Identity Theft Affidavit, if your e-filed return rejects because of a duplicate filing under your SSN or you are instructed to do so. Use a fillable form at IRS. gov, print, then attach the form to your return and mail according to instructions.
  • Continue to pay your taxes and file your tax return, even if you must do so by paper.
  • A complete step-by-step guide is available at identitytheft.gov. A comprehensive recovery plan is provided to guide you with the steps to take right away, what to do next to begin to repair the damage to your identity and credit, and other steps to be taken if appropriate. A checklist is available at identitytheft.gov steps with the information you need to move through this process.

About Data Breaches and Your Taxes

Not all data breaches or computer hacks result in tax-related identity theft. It’s important to know what type of personal information was stolen.

If you’ve been a victim of a data breach, keep in touch with the company to learn what it is doing to protect you and follow the “Steps for victims of identity theft.” Data breach victims should submit a Form 14039, Identity Theft Affidavit, only if your social security number has been compromised and your e-filed return was rejected as a duplicate or IRS has informed you that you may be a victim of tax-related identity theft.

How to Reduce Your Risk

Join efforts by the IRS, states and tax industry to protect your data. We all have a role to play. Here’s how you can help:

  • Always use security software with firewall and anti-virus protections. Use strong passwords.
  • Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card companies and even the IRS.
  • Do not click on links or download attachments from unknown or suspicious emails.
  • Protect your personal data. Don’t routinely carry your Social Security card, and make sure your tax records are secure.

For more information on how to protect yourself from identity theft and refund fraud, contact McManamon & Co. at 440-892-8900 or send us a message.

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