Combating Taxpayer Identity Theft
Taxpayer identity theft is becoming an increasingly common problem. Just this past year, one of my longest standing clients was unable to electronically file their tax return because someone had already filed a return using their social security number. The IRS determined that they were indeed the victim of identity theft, and now they are dealing with the fallout from it. Let me tell you, you don't want to have to go through that! There are numerous ways that you can protect yourself from identity theft, as well as steps to take if you find you have become a victim. Given my clients' experience of late, I felt they were worthy of passing on to you. Here are some practical steps you can take to avoid becoming a victim:
- Don't carry your Social Security card or any documents that include your Social Security Number (SSN);
- Don't give a business your SSN just because they ask. Give it only when required by law;
- Protect your financial information (e.g., by shredding such information before disposing of it);
- Check your credit report every 12 months;
- Review your Social Security Administration earnings statement annually;
- Secure personal information in your home;
- Protect your personal computers by using firewalls and anti-spam/virus software, updating secu-rity patches and changing passwords for Internet accounts; and
- Don't give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with. There are some tell-tale warning signs that there has been a tax-related identity theft. You should be on guard if you receive a notice from IRS or learn from your tax professional that:
- More than one tax return was filed for you;
- You owe additional tax, have a refund offset or have had collection actions taken against you for a year you did not file a tax return;
- IRS records indicate you received more wages than you actually earned; or
- Your state or federal benefits were reduced or cancelled because the agency received infor-mation reporting an income change.
So, what to do if you determine you have been victimized? Victims of tax-related identity theft should consider doing these things:
- File a report with the local police;
- File a complaint with the Federal Trade Commission (FTC) or the FTC Identity Theft hotline;
- Contact one of the three major credit bureaus to place a "fraud alert' on your account (Equifax, Experian, or TransUnion); and
- Close any accounts that have been tampered with or opened fraudulently.
In addition, if your SSN has been compromised and you know or suspect you may be a victim of tax-related identity theft, you should: -Respond immediately to any IRS notice and call the number provided; -Complete IRS Form 14039, Identity Theft Affidavit. You can use the fill-able form at the IRS's website, print, then mail or fax according to instructions; -Continue to pay your taxes and file your tax return, even if you must do so by paper; and -If you previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit. The IRS has noted that identity theft cases are among the most complex handled by the agency. It is continually reviewing processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized. Steps underway by the IRS to help victims include:
- The IRS Identity Protection PIN (IP PIN) is a unique six digit number that is assigned annually to victims of identity theft for use when filing their federal tax return that shows that a particular taxpayer is the rightful filer of the return.
- The IRS is offering certain taxpayers the opportunity to opt into the IP PIN program. These are taxpayers who may be unaware that they are identity theft victims but have been identified by the IRS because their accounts have indications of identity theft.
- THE IRS will continue its IP PIN pilot program that allows taxpayers who filed tax returns last year from Florida, Georgia or the District of Columbia to opt into the IP PIN program.
- This year, the IRS will use an online process through its website that will allow taxpayers who have an IP PIN requirement and lose their IP PIN to create an account and receive an IP PIN online.
- Victim case resolution cases are extremely complex to resolve, frequently touching on multiple issues and multiple tax years. A typical case can take 120 days to resolve, and IRS is working to streamline its internal process and reduce that time period.
There is unfortunately no full-proof guaranteed way to prevent identity theft from happening to you, but by watching carefully and taking the steps noted above, you can significantly reduce your chances of becoming a victim.
