Federal Income Tax Filings Bring Increase in Identity Theft

As individuals begin to file their federal income tax returns in the coming weeks, experts expect to see an increase in identity theft for the purpose of stealing income tax refunds.

Identity theft is commonly the main complaint filed by individuals with the Federal Trade Commission.  Identity theft has already been at the forefront of people’s minds recently with the recent data thefts from Target and Neiman Marcus that exposed personal information of tens of millions of individuals.

But many do not realize that over 40 percent of the identity theft complaints filed with the Federal Trade Commission related to federal income tax returns.

“It’s a lucrative crime and relatively easy to commit,” said Adam Levin, the founder of Identity Theft 911, an organization that specializes in identity theft protection and recovery services.  “All you need is a Social Security number and some counterfeit documents.  It’s much easier than selling drugs or stealing cars and a lot less risky for the bad guys.”

Steps You Can Take to Help Protect Your Tax Return from Identity Theft

A common approach of identity thieves regarding tax returns is to simply file a tax return using a person’s identity and bogus information before that individual can file their actual tax return.  If an identity thief’s bogus tax return makes it through the system, the identity thief will often have a refund in hand before the individual is aware that anything is wrong.  The individual generally does not find out they are the victim of identity theft until their receive a rejection of their legitimate tax return from the IRS because they should the individual has already filed a tax return.

A representative of the Federal Trade Commission noted that one of the easiest ways to combat this practice is for individuals to file their tax returns early.

“It really can be a race to the IRS,” said Steve Toporoff of the Federal Trade Commission’s Identity Protection Program.  “They usually don’t have access to W-2 forms, so they just make up income numbers and hope their phony return gets through the process.

In addition, take precautions in filing your tax return.  If you mail your tax return, drop the letter off at the post office rather than placing it in the mailbox at your home where thieves can easily pick it up before your postal worker does.  If you file your tax return electronically, be sure to use a computer you believe is safe, not a publicly accessible computer such as those at the public library or one that uses and unsecured wireless network at your local coffee shop.

IRS Dedicates Significant Resources to Identity and Prosecuting Identity Theft

The IRS considers such theft a serious matter, and they have over 3,000 employees dedicated to identity theft matters and over 30,000 employees with training to help them identity fraudulent tax returns.  In 2013 alone, the IRS opened criminal investigations into almost 1,500 identity theft related matters, a number that is up over 60 percent from 2012.

When an individual is the victim of identity theft involving tax returns, the IRS will resolve the matter and process the individual’s legitimate tax return.  But the process may delay any refund due to the individual by as much as six months.

“We applaud the IRS for taking steps to deal with this problem,” said Eva Velasquez, president and CEO of Identity Theft Resource Center, another organization that helps individual recover their stolen identities.  “They have thwarted billions of dollars in fraud, but there are still billions of dollars being stolen and more needs to be done.”

If you believe you have been the victim of identity theft related to you federal income tax return, you should contact the IRS’s Identity Protection Specialized Unit at 1-800-908-4490.

“The Social Security number is the Holy Grail,” added Velasquez.  “Once you have enough information to file a phony tax return, you have enough information to open new lines of credit, commit medical identity theft, and take over financial accounts.”

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by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.