No one wants any surprises during tax season – learn how to prevent and detect IRS identity theft now.
IRS identity theft, or “tax identity theft,” is a severe type of fraud that can upend your life and finances. That’s why, in this guide, we’re going to show you how to prevent, detect, and fix it.
Quick Overview
What’s Tax Identity Theft?
Tax identity theft occurs when someone files a fraudulent tax return in your name to steal the refund. This can have a devastating impact on your finances and personal security, and it’s often challenging to detect until it’s too late. According to Statista, over 45,000 tax-related identity theft reports were made to the Federal Trade Commission (FTC) in 2019.
How Does Tax Return Identity Theft Happen?
At the beginning stages of IRS identity theft, fraudsters can leverage a bit of personal information to gain access to progressively more sensitive information. The goal is to access your Social Security number with which they can fraudulently file taxes in your name and get a refund.
That’s all it takes. According to the ID Theft Resource Center, thieves target popular tax preparation services to access this information. They also use people-search sites, which broadcast your personal information online.
Risk Factors for IRS Identity Theft
While tax return identity theft could happen to anyone, the following factors can put you at a much higher risk:
- Lost Social Security Card: If you’ve misplaced your Social Security card, documents containing sensitive information, or any other important identification, you are at a heightened risk of IRS identity theft.
- Involvement in Data Breach: The IRS says that if your information has been compromised in a data breach, you could be at an elevated risk of IRS identity theft.
- Listing on People-Search Sites: Identity thieves choose their victims – how easy are you to find? People-search sites compile highly sensitive information about individuals in one place and then sell these packets to whoever is willing to buy them. This is a favorite resource for identity thieves since sometimes they include Social Security numbers and other highly sensitive information.
Red Flags that You’re a Victim of Tax ID Theft
Tax ID theft can be hard to detect. However, the IRS has compiled some of the biggest red flags that you’ve become a victim of fraud. These include:
- Receiving an IRS Notice: The IRS sends you a letter regarding a suspicious tax return that you know you didn’t file.
- You Can’t e-File Your Return: This could be the result of someone else filing a tax return using your Social Security number.
- Unrequested Tax Transcript: If a tax transcript ends up in your mailbox and you never requested one, someone else may have.
- IRS Account Notice: If you receive an IRS notice of an online account being created in your name, this is a clear sign of attempted tax ID theft.
- Additional Tax Request: It’s also suspicious if you’ve paid your taxes yet still receive IRS notices that state you owe money.
- Unknown Employer Income: If your IRS record indicates wages from an employer you don’t work for, it may be a sign of a fraudulent filing.
How Do I Fix Tax ID Theft?
If you’re a victim of IRS identity theft, it’s important to act without delay. The IRS recommends that you:
- Immediately Respond to Official IRS Notices: Take a moment to verify the integrity of the IRS notice, and then respond using the number attached to it.
- Complete the IRS Identity Theft Affidavit: If your return is rejected due to duplicate filings under your SSN, then complete the Form 1403 IRS Identity Theft Affidavit. Then, print the form and mail it to the IRS along with your return.
- Report Tax ID Theft to Relevant Entities: You can report tax ID theft to the Federal Trade Commission on their report page and to the IRS by completing Form 14039. You should also file a report with the credit bureaus using the following links: Experian, TransUnion, Equifax.
- Request a Copy of a Fraudulent Return: If you have suspicions about IRS identity theft, you can request a copy of a fraudulent filing made in your name. To do so, follow the instructions on the IRS website.
How Do I Prevent Tax Identity Theft?
Remember that tax ID theft occurs when someone steals your personal information, like your Social Security number. Any effective prevention strategy involves securing your information and actively monitoring all of your important accounts. Here are some steps you can take to accomplish this:
- Get an IRS Identity Protection PIN: You can sign up for an IP PIN with the IRS. This will offer additional protection for your Social Security number on your tax return. Getting an IP PIN involves a pretty rigorous Secure Access process, but it’s worth it to protect yourself.
- Opt-Out of People Search Sites: We’ve already mentioned how dangerous people-search sites can be. These sites are infamous for their tricky and misleading opt-out processes, and opting-out of hundreds of sites is very tedious. That’s why we built OneRep’s privacy protection tool, which will automatically remove your information from 196 sites.
- Secure Your Sensitive Personally Identifiable Information: Just like you need to secure your online information, personal documents such as tax returns, Social Security cards, government notices, and more should be stored in a highly secure container inside your home.
- Secure Your Accounts: A bit of personal information can be leveraged by fraudsters to access important accounts, and then those accounts can be further leveraged to commit more severe financial crimes or identity theft. Use completely randomized passwords to ensure password security and enable two-factor authentication on all accounts of importance.
- Understand Prevalent Scams: If you know what a phishing email is, how to report phone fraud, and are aware of other types of scams, you know that these are pretty common methods that identity thieves use to get your information. Never give out any details unless you’re certain that they are transmitted through a secure and official portal, such as a .gov site.
FAQ About IRS Identity Theft
Are IRS tax records public?
No. Your tax records are private and should be treated as highly confidential.
Does the IRS send letters about identity theft?
Sometimes. If the IRS sees suspicious activity, they will send notices. Make sure you verify the legitimacy of these notices before sharing sensitive information.
Why would I get a 5071c letter?
This identity verification form is often sent out if the IRS receives a tax return containing indications of fraud.
How can I prove my identity to the IRS?
If a tax return is suspected to be fraudulent, you can confirm your identity by filing a 5071c letter with the IRS.
How long does it take to get IRS refund after identity theft?
Getting an IRS refund after fraud could take as little as three months or as long as a year. It depends on the severity and nature of the crime.
What happens if I don’t verify my identity with the IRS?
The IRS will reject the return and begin investigating it as tax ID theft or fraud.
What does the IRS do with the form 14039?
Form 14039 is used to report suspicions of tax ID theft with the IRS. They will use this report to investigate the claim, clear your account, and release your return once it’s safe.
To Wrap it Up…
IRS identity theft is a highly consequential form of fraud. We hope this guide has helps identify how you can stop it before it happens and how you can fix it as quickly as possible. In either case, remember that scrubbing your information from people-search sites is an essential step to protect your identity. This can be done manually with our DIY removal guides or automatically with OneRep, which will handle all of the work for you automatically.
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