Identity theft is concern for most citizens, and we are bombarded with ads, suggestions and warnings every day. Perhaps you are reacting to this by being extra careful with your debit card at gas pumps or at restaurants. That’s a good start, but there’s another kind of Identity Theft that you should know about: Tax Identity Theft. In other words, someone could pretend to be you, file a fraudulent return, and walk away with a refund before the IRS knows that the filer wasn’t you. We all want a quick response from the IRS when we have a refund coming, right? Yes, but not if the refund is going to go to someone pretending to be you who files for a fraudulent refund. This not only can happen, it is happening – Treasury Department Investigators have discovered that the IRS is wrongly paying out billions in tax refunds: in 2011 alone, more than 5 billion.
Here’s what happens. Let’s say that somehow your Social Security number has been stolen – and you may not even know it. The thieves then file a bogus forged tax return with your name and social security number, but a different address where they’ll receive the refund. These thieves make sure to file those returns very early in tax season – even before the IRS can fact-check certain information from the wage-issuing companies (the thieves know this, of course). On their end the IRS works dutifully with the first return in the door that has a Social Security number, and sends that refund out ASAP. Someone else now has your potential refund. When you file, the problem is uncovered.
What to do:
- Always, Always, Always open your mail from the IRS. The letter could be telling you that more than one tax return for you was filed, or you received ‘wages’ from an employer unknown to you, etc.
- If you receive a notice from the IRS with this kind of information, respond immediately as instructed in the letter. This is information telling you that something is amiss, and you will help yourself if you contact the IRS quickly and work with them.
- Guard your social security number VERY carefully. Don’t carry your social security card (or any other card with the number on it) with you. Give the number out only when it is required (for instance seeking a mortgage, etc).
- Don’t give personal information to anyone who emails you unless you know who the contact is – The IRS does not initiate contact with taxpayers by email to request personal or financial information.
- If your identity has been stolen, or you think you may be at risk due lost or stolen personal information, contact the IRS Identity Protection Specialized Unit.
- If you believe that you have received suspicious online or emailed phishing scams, report it firstname.lastname@example.org.
- File your taxes early! If you get in the door first, not only do you get your refund fast, you actually GET your refund. Let the crooks be the ones holding the bag…
And perhaps, most importantly –
- Some of the identity/refund thieves are actually false firms posing as tax preparers. Never hand your information over to any person who is not a recognized tax professional with a reputable record of assistance to taxpayers.
If Taxpayer Identity Theft happens to you, the process of recovering funds and clearing up the mess that was created can be truly challenging. You can save yourself a lot of time and trouble by always working with a reputable tax professional and filing your taxes early.
For help with these and other tax issues, contact Litchfield County, Connecticut tax attorney Martha Miller, admitted to practice in CT, NY, and before the US Tax Court at 860-435-4666. We accept state tax problems for CT, MA and NY, and we accept U.S. federal tax problems from any location in the world.