According to the U.S. Department of the Treasury, identity fraud continues to be a growing problem. During this year’s tax season, more than 1 million tax returns were flagged by the IRS because of it. The amount confirmed to be fraudulent on the day of the flagging was 12,617, which was more than the amount of 9,626 last year. Identity theft was also the most prevalent type of fraud reported last year by consumers. The question is: why does this keep happening?
What is tax identity fraud?
Tax identity fraud occurs when someone uses your stolen Social Security number or personal information to file a tax return and claim your refund. It is a form of identity theft that has become increasingly worse in recent years. As a result, the IRS may flag your legitimate tax return as a duplicate, or worse, deny your refund altogether. It can take months or even years to resolve a case of tax identity fraud.
How does tax identity fraud happen?
There are several ways that criminals can obtain your personal information, including phishing scams, data breaches, and theft of mail or documents containing sensitive information. Once they have your information, they can file a tax return using your name and social security number, claiming a refund that they then redirect to a different address or bank account. It can be challenging to detect tax identity fraud until you attempt to file your own tax return and discover that one has already been filed under your name. To protect yourself, it’s essential to be vigilant about protecting your personal information and to file your tax return as early as possible each year.
What has the IRS done about this problem?
The IRS has taken a proactive approach toward identifying potentially fraudulent tax returns. Since 2022, the agency has increased the number of filters it uses from 168 to 236 to catch any signs of identity fraud. These filters are designed to identify suspicious claims made on tax returns, such as refunds claimed for wages that were not earned or deductions claimed for expenses that were not incurred. The IRS has also implemented new security features to protect taxpayers’ personal information, such as using two-factor authentication for online accounts. Additionally, the agency has formed partnerships with state tax agencies and tax-preparation companies to share information and identify patterns of fraud.
What can taxpayers do to prevent identity fraud?
Taxpayers are at risk of identity fraud, which can lead to financial loss, credit damage, and a lot of stress. It has been suggested that the best way for taxpayers to prevent identity fraud is to request an Identity Protection Personal Identification Number (IP PIN) directly from the IRS. This six-digit number is assigned to eligible taxpayers each year to help prevent fraudulent tax returns from being filed using their Social Security number. The IP PIN acts as an added layer of security and helps ensure that only legitimate returns are filed under the taxpayer’s name. Taxpayers can request an IP PIN through the IRS website, and it is recommended that they do so as soon as possible.
What to do if you become a victim
If you have been a victim of identity theft, it is important to take immediate action. Firstly, contact the IRS and let them know of the situation. They will provide you with information on how to proceed and will ask you to complete IRS Form 14039, Identity Theft Affidavit. It is important to note that even if you become a victim of identity theft, you should still pay your taxes and file your tax return on time. Additionally, you should file a complaint with the Federal Trade Commission (FTC) to report the identity theft and receive assistance in resolving any issues that may arise. Remember, taking immediate action can help minimize the damage caused by identity theft.
Unfortunately, there will always be people in this world who don’t care how hard you worked for your money and will do anything that benefits themselves. Hopefully, the IRS is able to minimize the identity fraud numbers next year, but it’s also on you as the taxpayer to take preventative measures. If you have any additional questions, don’t hesitate to contact us! See also: 12 Scams The IRS Wants You to Avoid: The “Dirty Dozen.”