Tax Series #11: Beware of Tax Identity Theft

Hello everyone,

In today's always-on data-rich environment, ID theft is a big concern that costs individuals, companies, and governments untold billions of dollars. Tax ID theft is no exception. According to the Internal Revenue Service, $5.8 Billion has been paid out in fraudulent tax refunds in ONE year. So how does someone perpetrate this type of crime and what should you do if you were unfortunate enough to become a victim? I will answer these questions below...

Tax identity theft occurs when someone uses your Social Security Number to file a fraudulent tax return in your name to collect the tax refund. You will find out if you are a victim when one of two things happens: when you try to e-file your tax return, the IRS will not accept your return since they already received a tax return, or you will get a letter from the IRS noting that there has already been a tax return submitted under your Social Security Number.

Also, know the warning signs: if the IRS records show that you received wages from companies that you never heard of, or that you owe additional taxes in years where you did not file a return, then you know you have a problem.

Given the large number of ID theft cases, what can you do if you are a victim?

1. Alert the IRS by filling out Form 14039, Identify Theft Affidavit and mail it in with your tax return. (yes still send in your tax return and pay the tax owed if any.)
2. Provide timely responses to any IRS notices and letters, and call them at the number provided if necessary (one tip, calling them on Friday mornings is the best time from my personal experience)
3. Contact the Federal Trade Commission and file a formal complaint.
4. Contact the 3 major credit bureaus (Equifax, Experian, TransUnion) and place a fraud alert.
5. Contact your banks and closely monitor suspicious activity in your accounts.

Final words: prevention is the best medicine. Reduce the risk of becoming a victim by:

• Avoid scam emails, and do not open links in the emails. (using a strong anti-virus software will help!)
• Do not trust anyone on the phone masquerading as IRS tax agents or bank executives. No legitimate sources will ask for your Social Security and other personal data over the phone.
• Do not carry your Social Security card in your wallet.
• And lastly and most importantly, please use common sense! If someone says that you can pay your taxes via iPhone Gift Cards, that someone is probably a bad guy!

If you are interested in learning more, check out the IRS Publication 4524.

If you are not sure about something, as always, I am here to help. Feel free to reply with your questions and I will guide you in the right direction. Thanks for reading!

If you like my tax series, check out my previous posts below:

Tax Series #10: Child Tax Credit

Tax Series #9: Standard Deduction vs. Itemized Deduction

Tax Series #8: Child Support vs. Alimony, and Why it Matters!

Tax Series #7: Top Tax Tips to Save Money

Tax Series #6: Tax Benefits for Students

Tax Series #5: Do you need to file an income tax return every year?

I also started a new series on personal finance below:

Personal Finance Series #3: Investment Advice from Warren Buffett

Personal Finance Series #2: Top Money-Saving Tips

Personal Finance Series #1: Money Management 101

About the Author : I am a cryptocurrency enthusiast and a U.S. Certified Public Accountant with over 15 years of experience in accounting, taxation, and finance.

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If you like this series, please follow me @qwesttexas. I am here to help the Steemit community with tax and finance questions, and break down confusing tax jargon into plain English so that we can all benefit from it. Let's go Steem!