Protect Yourself From Tax-Related Identity Theft

Tax-related identity theft occurs when someone uses your personal information, such as your Social Security number (SSN), to file a fraudulent tax return and claim a refund. This type of identity theft can leave you in a precarious situation, as it disrupts your tax filing process and may lead to financial complications. Understanding what tax-related identity theft entails is crucial to safeguarding your finances and ensuring that you can file your taxes smoothly each year.

Tax-Related Identity Theft Warning Signs

Recognizing the warning signs of tax-related identity theft is essential in preventing financial loss and stress. In many cases, you may not know that you’re a victim of tax-related identity theft until you are notified by the IRS. There are, however, some distinct signs that you may have an issue, such as:

• Receiving a letter from the IRS inquiring about a tax return you did not file.
• Not being able to e-file because of a duplicate SSN.
• Being notified that an IRS online account was created under your name.
• Receiving a tax transcript that you did not order.
• Being assigned an Employer Identification Number (EIN) but you did not request one.
• Receiving an IRS notice that your existing online tax account was disabled, updated, or accessed but you haven’t logged into it.

Another sign that you may be a victim of tax-related identity theft is records of income or wages received from an employer you never worked for in the past or present. This is a clear indication that someone is fraudulently using your SSN.

Financial Impact of Tax-Related Identity Theft

The financial impact of tax-related identity theft can be significant and far-reaching. One immediate consequence is the delay in receiving your legitimate tax refund while the IRS investigates the fraudulent claim. This delay can create financial strain, especially if you rely on your refund for essential expenses or debt repayment.

Aside from refund delays, victims may incur costs related to resolving the theft, such as hiring a tax professional or legal assistance to navigate the complexities of the situation. The longer-term financial implications might include damage to your credit score if the identity theft extends to other areas like opening unauthorized credit accounts.

Furthermore, the emotional toll of dealing with identity theft should not be underestimated. The stress and anxiety of resolving the issue, coupled with the fear of future identity misuse, can affect your overall well-being. Being proactive and informed can help minimize these impacts and restore your peace of mind.

Steps to Take If You’re a Victim

If you suspect you are a victim of tax-related identity theft, taking immediate action is essential to limit further damage. Here are the key steps to follow:

1. Contact the IRS. Reach out to the IRS Identity Protection Specialized Unit at 1-800-908-4490. They can assist you in resolving the issue and guide you through the next steps.
2. File an Identity Theft Affidavit. Complete IRS Form 14039, Identity Theft Affidavit, to officially report the fraudulent activity. This form helps the IRS verify your legitimate return and initiate a resolution.
3. Monitor Your Credit Reports. Obtain your free credit reports from the three major credit bureaus – Equifax, Experian, and TransUnion. Look for any unauthorized accounts or activity and report discrepancies to the credit bureaus immediately.

If you believe that someone has falsely filed a tax return under your name and SSN, you can also get a copy of the return. To request the return, complete Form 4506-F, Request for a Copy of Fraudulent Tax Return. You can submit the form by mail or fax.

• By Mail – Department of the Treasury, Internal Revenue Service, Fresno CA, 93725
• By FAX – Include a cover sheet marked ‘Confidential’ and FAX the form toll-free to 855-807-5720

The IRS will acknowledge your request within 30 days of receipt and generally send a follow-up letter or a copy of the return within 90 days.

Additional Steps to Take

Reporting tax-related identity theft promptly and accurately is crucial for resolving the issue and protecting your finances. In addition to the steps above, you should also consider taking the following steps:

• File a police report with your local law enforcement agency. Although it may not directly impact your IRS case, having a police report can be beneficial if the identity theft extends to other areas, such as unauthorized credit activity. It serves as an official record of the crime and may be required by financial institutions or credit bureaus during the resolution process.
• Report the identity theft to the Federal Trade Commission (FTC) via their website, IdentityTheft.gov. The FTC can help you create a recovery plan and offer resources for victims of identity theft.

By following these steps, you can effectively report the theft and begin the process of restoring your financial security.

Tips For Protecting Your Data and Identity

Preventing tax-related identity theft starts with safeguarding your personal information. Here are some practical tips to help protect your data.

• Secure Your Online Accounts. Use strong, unique passwords for all your online accounts and enable two-factor authentication where possible. Regularly update your passwords and avoid using the same password across multiple sites.
• Be Wary of Phishing Scams. Identity thieves often use phishing emails or phone calls to trick you into revealing personal information. Be cautious of unsolicited requests for sensitive data and verify the legitimacy of any contact before responding.
• Shred Sensitive Documents. Dispose of financial documents and any paperwork containing personal information securely by shredding them. This prevents thieves from accessing your data through discarded materials.
• Protect Your Devices. Equip your electronic devices with up-to-date antivirus software and firewalls. These tools provide a critical line of defense against malware and other cyber threats that seek to steal your information. Regularly updating your software ensures you are protected against the latest threats.
• Beware of Public WiFi.  Exercise caution when using public WiFi networks, as they are often unsecured and can be exploited by hackers. Avoid accessing sensitive information or conducting financial transactions on public networks. Instead, use a virtual private network (VPN) for secure internet browsing

Implementing these measures can significantly reduce your risk of falling victim to identity theft. By remaining vigilant and proactive, you can protect your data and maintain control over your financial information.

Final Thoughts

Recognizing the warning signs of tax-related identity theft is essential in protecting your finances and ensuring a smooth tax filing process. By understanding the implications and taking preventive measures, you can reduce the risk of becoming a victim. In the unfortunate event that you do experience identity theft, knowing the steps to take and utilizing available resources can help you recover effectively.

Taking action today can prevent headaches tomorrow. Stay informed, remain vigilant, and prioritize your cybersecurity practices. Protecting your financial well-being requires ongoing effort and awareness, but the peace of mind it brings is invaluable.