The Tax Identity Theft Field Guide
Thank you so much to Block Advisors for sponsoring this post!
Being the victim of tax identity theft can be an incredibly stressful experience, I wanted to cover what tax identity theft is, why it matters, and what you can do to prevent it. Most importantly, I wanted to let you know what to do if you do fall victim to tax identity theft.
Like most things, prevention is key. It’s much better to prevent this situation from happening, then trying to fix it after it happened.
Identify theft is the fastest growing crime in the United States and it can be a stressful and complicated crime for a victim to sort through the aftermath. Most people think of identity theft as a security breach at a store that has an electronic record of your debit card (like the highly publicized security breach of Target in 2013). That type of identity theft is usually pretty easy to fix for the victim since most banks have fraud protection and can cancel the stolen card, order you a new one and refund the stolen money.
Unfortunately, that’s not the case.
If you write off identity theft, thinking that's the worst of it, you're really doing yourself a disservice.
Identity theft is a complicated crime with far reaching effects. Effects that can be felt by the victim for years. I have a unique perspective on this, because prior to blogging full time, I spend 9 years in law enforcement.
I saw the fallout from identity theft pretty frequently. And statistics show that identity theft is just getting worse.
What is tax identity theft?
Assuming someone’s identity to file taxes for financial gain is called tax identity theft.
I’ll give you an example. If someone steals your SSN and files taxes reporting that you have business losses and are due a huge refund, they would get the refund. When you went to file your taxes, you would get your refund rejected for having already filed. The burden of proof is on you to prove to the IRS that the filing was fraudulent.
This takes time, stress and effort to battle. On average it takes 120 days to get everything back in order with your taxes.
How do you know if you’ve been the victim of tax identity theft?
You would be notified that your refund was rejected by the IRS because more than one return was filed by you.
This could be right away at the time of filing, or by a letter received after you have submitted.
You should know that if your identity has been stolen before, you're considered to be high risk for tax identity theft.
How can I prevent tax identity theft?
The short answer is that you can’t. You can do things to help prevent it, but our society relies strongly on information technology. That means that your social security number, name and birthdate are vulnerable even if you do everything “right”.
Doctors offices, banks, jobs, and more all have this identifying information stored. Your information is only as secure as their data protection system.
Even though you can't completely prevent it, you should do your part to protect your information.
- Keep your identifying information secure. Never give out your identifying information unless you know who you're giving it to and why they need it.
- Keep your computers (and smartphones) that have identifying information stored on it secure.
- Shred any document with identifying information on it before disposing of it.
What should I do if I’m a victim of tax identity theft?
- Contact a tax professional and bring the notification from the IRS with you to the meeting.
- Complete and file IRS form 14039 , which is an identity theft affidavit.
- File a local police report.
- File an identity theft report with the federal trade commission.
- Set up fraud alerts with all three credit bureaus (Equifax, Transunion and Experian).
- Monitor your credit report closely for the next year.
If you need help, Block Advisors have professionals who are trained in this area and can help you through it. They can even submit your return by paper if the electronic return was rejected by the IRS. You can contact Block Advisors here.
Block Advisors also offer Tax Identity Shield, which can help you obtain additional IRS identity protections (like having a yearly pin assigned that is needed to file in order to prevent fraud activity) as well as walking you through the recovery if you’re ever a victim of identity theft. You can find out more about their services here.
Do you know someone who was the victim of identity theft?
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