Though income-tax season has started, many might not be in a hurry to file their returns. But it’s a sure bet that criminals are poised to push the send button and transmit bogus documents.
Using the victim’s Social Security number, they snag a refund before the legitimate taxpayer files.
A 2013 Treasury Inspector General for Tax Administration report found that while the IRS is stopping more fraudulent returns, it issued an estimated $3.6 billion in potentially bogus 2011 refunds.
The problem of tax-related identity theft continues to grow along with identity theft overall. Take the recent Target and Neiman Marcus breaches.
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“There is nothing a large company can do to completely protect itself,” said Jonathan Bochese, an attorney at Jacksonville, Fla.-based Tax Defense Network, a tax-resolution firm. “There are people out there trying to hack websites. If a database exists, someone can get into it.”
Likewise, although there are measures people can take to keep from becoming a victim of identity theft, there’s no way to completely remove the risk.
What’s a legitimate taxpayer to do? Beat the crooks to it.
“If you file your return as close to opening day as possible, it minimizes the chance the fraudulent return will get there first,” Bochese said. “The IRS will process the return they get first.”
Bochese said a mailed return can take 10 to 20 days to enter the IRS’ system, so e-filing is advised.
If the IRS becomes aware you have been a victim of tax-return fraud, it will send you a letter, not an email. The IRS never sends emails, Bochese said.
The IRS has issued six-digit identity-protection PINs to taxpayers who have been victimized in past years. This year it expects to provide more than 1.2 million taxpayers with PINs.
For the second tax season in a row, the number of PINs has nearly doubled from the year before. The PIN allows these individuals to avoid delays in filing returns and receiving refunds.
The agency said it has ramped up its efforts to combat the problem by assigning more than 3,000 IRS employees to work on identity-theft-related issues. In addition, the IRS provides training to more than 35,000 employees who work with taxpayers to recognize identity-theft indicators and victims.
From 2011 through last November, the IRS reported, it stopped 14.6 million suspicious returns and protected more than $50 billion in fraudulent refunds.
This year it’s increasing both the number and efficiency of identity-theft filters used to identify a potentially fraudulent return due to identity theft before it processes the return and releases any refund.
While identity theft is a huge issue that will continue to grow, Bochese’s advice is not to be fearful, but to be aware.
Here are his tips for lowering your risk of becoming a victim of identity theft:
• Do not carry your Social Security card with you. Keep your Social Security card and any other document with your Social Security number on it in a safe place, like a locked fireproof box or safe. The easiest way to get your identity stolen is through your SSN and legal name.
• Be wary of giving out personal/financial information. Remember, the IRS, banks, and other financial institutions will not communicate with you via email. To best protect your identity, do not use your Social Security number online or through email or text.
• Protect your online accounts. Check for the secure-transaction label when making payments online, and be aware of any security breaches with regularly used national retailers. In addition, be careful of the information (like birth names, addresses, places of employment, etc.) you show on your social-media accounts. Be sure to have a solid firewall and anti-malware software, and to regularly change your passwords.
• Check your credit report regularly. The best way to stay on top of your identity is through credit reports. Go to annualcreditreport.com
and get a free report from each of the three credit bureaus once a year.
• Be proactive. If you suspect someone is using your identity or has your information, contact the IRS using Form 14039 to inform them of the potential issue. This will lock your account and, although it will make it more difficult for you to receive information from the IRS, it may prevent thieves from defrauding you or the government.