You go to file your tax return, and it gets rejected by the IRS stating that a return with your social security number has already been filed. How can that be? This past tax filing season saw a rise in the number of tax-related identity theft cases, with information from 104,000 filers being stolen by scammers in recent months.

A tax-related ID theft cautionary tale

Tax-related identity theft occurs when your social security number is used without your permission or knowledge to file a claim for a tax refund. Typically, fraudulent returns are filed early in the year, prior to the due date of required employer information reporting (i.e., Forms W-2 or 1099MISC), which results in the IRS not being able to match the “employee” and employer information. Since the IRS is required to pay out refunds within a certain amount of time, the process of matching employee and employer filing documents occurs after the refund check is issued and cashed.  This related to approximately 13,000 fake information returns getting through the IRS fraud system, leading to around $39 million in fabricated refunds.

What can you do if this happens to you?

The IRS has compiled a Taxpayer Guide to Identity Theft, which provides lists of warning signs, steps to take, and tips to reduce your risk. A few of their tips include the following:

• Protect your personal computers by using firewalls, anti-spam/virus software, update security patches and change passwords for Internet accounts.
• Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking.
• Don’t routinely carry your Social Security card or any document with your SSN on it.

The Federal Trade Commission provides a Step-by-Step Checklist of what to do if you have been a victim of identity theft, tax-related or other.  Their checklist includes information on what to do right away, what to do next, and any other additional steps that you might have to take depending on your situation.

Keep in mind that the IRS sends notices by regular mail, and that they will not email you asking for personal information.  You should report suspicious emails to phishing@irs.gov, and suspicious phone, fax or mail scams to 1-800-366-4484.

For more information, please contact Samantha Affolter at 716.634.8800 or saffolter@dopkins.com.

About the Author

Samantha Affolter CPA

Samantha helps both business and individual clients with her tax compliance and tax planning expertise.