Unfortunately, tax professionals like us find ourselves on the front line in the fight against identity theft. Identity theft is rampant. Every year, the IRS pays out billions of dollars to identity thieves that submit fraudulent tax refund claims. Here are some a good ways to prevent your tax returns from becoming a vehicle for identity theft. File your tax returns early and file them electronically.
Thousands of taxpayers every year learn that fraudulent tax returns have been filed for them by identity thieves. Fake refund claims using stolen taxpayer information are a profitable source of revenue for identity thieves. Once the fraudulent return has been filed and accepted by the IRS, the taxpayer can’t file their legitimate tax returns electronically. The IRS’s electronic filing system won’t accept a second return for the year when a refund has already been issued. This is one of the most common ways for victims to learn their identities have been compromised.
Filing your tax returns early helps minimize the losses the IRS takes from all these fraudulent refund claims. Once your legitimate tax return has been filed, the IRS is unlikely to issue a refund to a subsequent fraudulent return using your identity. It also helps taxpayers avoid the hassle and delay of submitting the extra paperwork needed to get their legitimate tax refunds. The process of obtaining your refund after a fraudulent tax return has been filed using your name and taxpayer identification number involves filing an Identity Theft Affidavit, form 14039, and waiting for the IRS to investigate the fraud before they issue your refund. More information about the process can be found on the IRS’s website: How IRS ID Theft Victim Assistance works | Internal Revenue Service.
Another way to avoid being victim to fraudulent tax refund identity theft is to use an identity-protection personal identification number (IP PIN). Previously these were only available to taxpayers that had experienced identity theft. Now they are available for all taxpayers. Look for the identity protection tool on the IRS’s website: Get An Identity Protection PIN | Internal Revenue Service (irs.gov) .
The IRS’s website has lots of information and resources useful in the fight against identity thieves. For individuals, the Taxpayer Guide to Identity Theft can be found at Taxpayer Guide to Identity Theft | Internal Revenue Service (irs.gov). For businesses, Identity Theft Information for Businesses is at Identity Theft Information for Businesses | Internal Revenue Service (irs.gov) .
Victims of identity theft should also contact their state tax revenue department regarding fraudulent state returns filed under their identity.
– Mark S Gleason, CPA
– Mattson Gleason CPAs Ltd