Identity Theft and Taxes: What You Need to Know

Identity theft is a serious crime that can cause significant financial damage to its victims. One area where identity theft can have a particularly harmful impact is taxes. In this article, we’ll explore the risks of identity theft when it comes to taxes, and provide tips on how to protect yourself.

The Risks of Tax-Related Identity Theft

Tax-related identity theft occurs when someone uses your personal information, such as your Social Security number, to file a fraudulent tax return and claim a refund. This type of identity theft can be particularly damaging because it can take months or even years to resolve, and can result in lost refunds and penalties.

The Internal Revenue Service (IRS) has reported a significant increase in tax-related identity theft in recent years. In fact, in 2020, the IRS reported that it had prevented $4.5 billion in fraudulent refunds from being issued. This highlights the importance of being vigilant when it comes to tax-related identity theft.

How to Protect Yourself from Tax-Related Identity Theft

There are several steps you can take to protect yourself from tax-related identity theft. Here are some tips to keep in mind:

1. Keep Your Personal Information Secure: One of the best ways to prevent tax-related identity theft is to keep your personal information secure. This means safeguarding your Social Security number, birthdate, and other sensitive information. Be wary of sharing personal information over the phone or online, and always verify the identity of anyone requesting this information.
2. File Your Taxes Early: Filing your taxes early can help prevent identity thieves from filing a fraudulent return in your name. If you file your taxes before a thief can file a fraudulent return, the thief’s return will be rejected.
3. Be Aware of Phishing Scams: Phishing scams are a common way for identity thieves to obtain personal information. Be wary of emails or phone calls that appear to be from the IRS, and never provide personal information in response to these types of messages.
4. Monitor Your Credit Report: Regularly monitoring your credit report can help you detect any suspicious activity that may indicate identity theft. You can obtain a free credit report from each of the three major credit reporting agencies once a year by visiting AnnualCreditReport.com.
5. Consider Using an Identity Theft Protection Service: Identity theft protection services can help you monitor your credit report, alert you to suspicious activity, and provide assistance if you become a victim of identity theft.

What to Do If You’ve Been a Victim of Tax-Related Identity Theft

If you believe you’ve been a victim of tax-related identity theft, there are several steps you should take immediately. Here are some key actions to consider:

1. Contact the IRS: Call the IRS Identity Protection Specialized Unit at 1-800-908-4490 to report the theft and request an Identity Protection PIN (IP PIN). This PIN will be used to verify your identity when you file your tax return.
2. File an Identity Theft Affidavit: Complete Form 14039, Identity Theft Affidavit, to alert the IRS of the identity theft.
3. Contact the Credit Reporting Agencies: Contact the three major credit reporting agencies (Equifax, Experian, and TransUnion) to place a fraud alert on your credit report.
4. File a Police Report: File a report with your local police department to document the theft and obtain a copy of the report.
5. Consider Using an Identity Theft Protection Service: An identity theft protection service can help you resolve the issue and prevent future incidents.

In conclusion, tax-related identity theft is a serious crime that can cause significant financial harm. By taking steps to protect your personal information, being aware of phishing scams, and monitoring your credit report, you can reduce your risk of becoming a victim. If you do become a victim of tax-related identity

theft, it’s important to take immediate action to minimize the damage and prevent further harm.

By reporting the theft to the IRS, filing an Identity Theft Affidavit, contacting the credit reporting agencies, filing a police report, and potentially using an identity theft protection service, you can take steps to resolve the issue and regain control of your finances.

It’s also important to remember that prevention is key when it comes to tax-related identity theft. By staying vigilant and taking proactive steps to protect your personal information, you can reduce your risk of becoming a victim.

In addition to the tips outlined above, it’s a good idea to stay up to date on the latest news and trends related to identity theft and taxes. The IRS provides regular updates on tax-related identity theft on its website, and there are a variety of online resources and news outlets that can help you stay informed.

In conclusion, tax-related identity theft is a serious threat that requires careful attention and proactive measures to prevent and mitigate. By taking steps to protect your personal information, staying vigilant for potential scams, and knowing what to do in the event of a theft, you can reduce your risk and stay in control of your financial well-being.