Identity Theft on The Rise
Identity theft is on the increase, and the IRS is developing a robust response to claims. In 2011, the IRS had approximately 1,000 employees allocated to process identity theft claims. In 2012, that number had swelled to 3,000.
The ease in which tax returns are filed is one of the prevailing reasons for fraud. Since W-2s aren’t matched to tax returns until well after a return is filed, all a fraudster needs to fake a return is a name, accompanying social security number, and fake W-2 information.
An effective means to thwarting identity theft is filing your taxes early. The IRS can only accept one e-filed tax return per taxpayer, and therefore the first to file wins.
New IRS technology is in place to attempt to identify fraudulent returns. These filters attempt to monitor filings and catch returns which have a high probability of fraud, such as a single address used repetitively, a return showing vastly different financial information (such as adjusted gross income) than historically claimed, or returns with more dependents than claimed on prior year returns.
How do they do it?
The taxpaying public needs to be aware of phishing activities. No, this kind of phishing is unrelated to the famous touring jam band. This kind of phish shows up in your e-mail, generally in the form of fake e-mails from banks and even the IRS. These e-mails contain hyperlinks to fake websites that ask for non-public information like social security numbers.
You can protect yourself by never opening e-mail from someone that you do not know. Many e-mail software programs allow you to move your mouse over the hyperlinks to see where they are attempting to redirect you. If the hyperlink is not one you recognize, never click on it!
If you receive an unsolicited e-mail that appears to be from the IRS, report it by sending it to email@example.com. The IRS NEVER contacts taxpayers via e-mail!!!
There are many other methods, which include wi-fi hacking, mag stripe swiping, and others.
How can I prevent identity theft?
The IRS advises taxpayers to:
– Leave your social security card at home
– Protect computers using firewalls and anti-spam and anti-virus software
– Do not give personal information over the phone or internet unless you know with whom you are dealing
– Properly monitoring your credit reports using services like annualcreditreport.com
What if my identity was stolen?
If you are the victim of identity theft, you shoudl fill out IRS Form 14039 Identity Theft Affidavit. This will notify the IRS of your identity theft and allow them to properly investigate. You will receive in the mail an ‘identity theft pin’ which will be required to be used in order to e-file in future years.
You should also file a police report and retain a copy of the report for the IRS and other institutions. Generally this report can be taken over the phone and you will be able to request a copy of the report within days after filing.
You may also notify the three major credit bureaus, Equifax, Transunion, and Experian, to place a fraud alert on their credit file. Any attempts to receive credit will be met with the requirement of verbal or other verification of identity. These alerts do expire after 90 days, so it is important you renew them if necessary.
If you were the victim of identity theft, or need tips on avoiding identity theft, please contact our office.
Information has been summarized from an article in the EA Journal, December 2013 written by Theodore A. Sinars, JD and Claire L. McMahon, JD.