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In 2016, the IRS joined state taxing authorities and the tax industry to enact new safeguards and take additional action to help in the fight against tax-related identity theft. There are ways that you, too, can reduce the risk of identity theft.

Tax-related identity theft occurs when someone uses a stolen Social Security number (SSN) to file a return in an effort to claim a fraudulent refund. Most of the time, the taxpayer is unaware that someone has even filed a tax return using the taxpayer’s SSN until they file their tax return and discover that a return has already been filed using their SSN. The IRS may also send the taxpayer a letter saying they have identified a suspicious return using the taxpayer’s SSN. In 2016, the IRS anticipates $21 billion in tax refund fraud.

Tax-related identity theft continues to grow each year. In 2013, the Federal Trade Commission (FTC) received 2,545 complaints about IRS imposter scams. This number grew to 54,690 in 2014. In 2014, the FTC also received 109,063 complaints about tax identity theft, accounting for 32.8% of all complaints filed with the FTC. As of 2014, the IRS had assigned more than 3,000 employees to focus on identity theft issues.

Responding to Identify Theft

If you are notified by the IRS, or suspect you are a victim of identity theft, the FTC recommends the following steps:

  • File a complaint with the FTC at identitytheft.gov.
  • Contact one of the three major credit bureaus (EquifaxExperian or TransUnion) to place a fraud alert on your credit records.
  • Close any credit or financial accounts that have been tampered with or opened without your consent. You can receive complimentary copies of your credit reports once per year at annualcreditreport.com to check all of your accounts.
  • Contact the IRS by calling the number provided to you on the notice informing you of the fraud, or by calling 800-829-1040.
  • Complete and file IRS Form 14039, the Identity Theft Affidavit, to clear your tax record.
  • Continue to pay your taxes on time, even if you must do so by check, to avoid other problems with the IRS.

Preventing Identify Theft

Taxpayers can reduce the risk of tax-related identity theft by knowing the signs of a possible scam. Some red flags alerting you of likely scams can include:

  • The IRS never contacts taxpayers by email or text messages to request personal or financial information.
  • The IRS does not call you unless you are currently working with the IRS on an audit or payment plan.
  • The IRS never asks for immediate payment; instead, they will send you a letter with a payment due date. Also, the IRS will never threaten police involvement or incarceration.
  • The IRS will never direct you to a particular payment method.

Therefore, if you receive a phone call from the IRS saying you owe money immediately and you must pay by credit card or the police will get involved, hang up immediately because the phone call is a scam.

To reduce your risk of identity theft, the IRS recommends that you always use security software with firewall and anti-virus protections, and do not click on links or download attachments from unknown or suspicious emails. Also, make sure that the company e-filing your tax return is registered with the IRS, and do not use a public computer or public network to file. Lastly, file your tax return as early as possible, before anybody can file a return for you.

At Selden Fox, we take the appropriate precautions against identity theft by e-filing tax returns whenever possible, as electronic filing is more secure than paper filing. Selden Fox also offers the opportunity to have your refund directly deposited into your bank account, which can be weeks faster and safer than receiving a paper check in the mail.

Selden Fox uses a secure server with firewall protection that requires password entry. We also offer an encrypted portal for document sharing, as an alternative to email.

Please call our office if you have questions as to possible identity theft or IRS phone scams.

John Wojcik

John Wojcik is a Tax Manager and works with a variety of firm clients, including individuals, family businesses, business owners, and various corporations. John earned his bachelor's degree in accounting from Illinois State University and his MST in taxation from Northern Illinois University - College of Business.