Q: Someone filed a tax return in my name and received my refund. Now what?
A: It’s called tax identity theft, and unfortunately you’re not alone. The IRS is well aware of the problem. In 2013, it protected $24.2 billion of fraudulent refunds, including those related to identity theft, compared with $20 billion in 2012.
As you likely know, identity theft can be a risk every time you swipe your credit card at a store or provide your Social Security number online. But you might not realize how it works on the tax front. Clever con artists masquerading as IRS representatives or agents may try to steal your vital information and use it for illegal means. Or an identity thief could file a fake tax return under your Social Security number to obtain your refund.
Here are some ways you may find out that you’ve been the victim of a tax identity scam:
- You receive an IRS notice or letter stating that more than one tax return for you was filed. A criminal may have used your identity to fraudulently file a tax return and claim a refund. Generally, identity thieves use a stolen
Social Security number and try to file early in the tax season to collect a refund before the legitimate
- You’re informed by the IRS that you have a balance due or a refund offset, or a collection action was
taken against you for a year in which you didn’t file a tax return.
- IRS records indicate you received wages from an employer unknown to you.
Obviously this is a troubling situation. If you are due a tax refund but someone has beaten you to it by filing a tax return in your name and with your Social Security number, it could be months before the IRS is able to determine which return is legitimate and which is fraudulent.
How can this happen?
Part of the problem is the vulnerabilities involved in the way the IRS delivers refunds, according to an investigation by the Treasury Inspector General for Tax Administration (TIGTA). As part of the investigation, TIGTA looked at 1.5 million cases of undetected fraud. Of those, 1.2 million cases (82%) involved the issuance of directly deposited refunds, including refunds issued on debit cards.
While opening a bank account requires personal identification, TIGTA said “each method of obtaining a debit card requires a different level of verification in order to acquire a card.” In a previous TIGTA report, an investigation showed that the IRS was “not in compliance with direct deposit regulations that require tax refunds to be deposited to an account only in the name of the individual listed on the tax return.”
What is being done to stop ID theft?
In response to growing ID theft concerns, the IRS has embarked on a comprehensive strategy for preventing, detecting and resolving identity theft cases as soon as possible. The IRS also has stepped up its internal reviews to help spot false tax returns before tax refunds are issued and vowed to continue to help victims of identity theft refund schemes.
If you believe your personal tax information has been stolen and is being used for illegal purposes, immediately contact the IRS Identity Protection Specialized Unit. For more information, visit the IRS website at www.irs.gov/identitytheft.