Tax season is officially underway! While most of us will probably wait until closer to April 15 to file our taxes, there is one group that can’t wait to get a jump on filing: Tax ID thieves.
Identity theft has been the most common type of scam reported to the Federal Trade Commission for the past thirteen years. For identity thieves, however, just stealing an identity is only the beginning of their scam. They typically want to turn that identity into cash. Using stolen personal information to open new lines of credit used to be the option of choice. However, in recent years the ID thieves have latched on to a new scam – using stolen identities to obtain fraudulent tax refunds.
According to the FTC, more than 46% of all identity theft complaints now stem from government documents/benefits fraud, the vast majority of which stems from tax-related ID theft. In 2011 alone, approximately 1.1 million suspicious tax returns were identified, resulting in $3.6 billion in potentially fraudulent refunds being paid out, according to the IRS.
It’s not hard to see why this is such a popular scam among identity thieves. If a scammer files a fraudulent return early in tax-filing season, the fraud is unlikely to be discovered by the victim until months later. The first inkling that many consumers have that their identities have been used in this way is when the IRS declines to process the legitimate tax return because a fraudulent one has already been filed in that person’s name.
Consumers who think they may have been affected by tax ID theft, or who receive a notice from the IRS about a potential problem with their return should take the following steps:
- Contact the IRS’s Identity Protection Specialized Unit at 1-800-908-4490. Specialists from the IRS can help you to get your return processed and take steps to protect your IRS account.
- Put a fraud alert on your credit reports with the three major credit-reporting agencies. When this is done, when someone tries to obtain credit in your name, the business offering credit must contact you to verify your identity. This initial alert will only last for 90 days, so you may want to renew it after the initial period.
- Order your free credits reports for the three major credit-reporting agencies from annualcreditreport.com and check it for errors. If you discover any, dispute them with the reporting agency and the creditor.
- File an identity theft complaint with the FTC and save or print the Identity Theft Affidavit that you receive at the end of the process.
- File a report with your local police department and keep a copy of the report on file.
In addition to tax-related ID theft, consumers should also be aware that scam artists may use tax time to pitch phone scams, claiming to be with the IRS and threatening dire consequences (fines, lawsuits, jail time, etc.) if a victim doesn’t pay fictitious “back taxes.” A consumer we’ll call “Lindsay” from Pennsylvania recently reported just such a scam to Fraud.org. Lindsay received an unsolicited call from a call claiming to be an IRS agent. The caller said she owed back taxes and that the police were on their way to arrest us. The caller said that the only way Lindsay could avoid arrest was if she went to CVS or Walmart and obtained a money order at which time she’d be instructed about where to wire the money. Fortunately, Lindsay got suspicious and didn’t get scammed but many consumes aren’t so lucky.
If someone claiming to be an IRS agent or other government employee calls you demanding payment for “back taxes” or other reasons, simply hang up. If you are still concerned, look up the customer service number for the agency the caller claimed to represent (these are usually listed in the front of the phone book, or online) and call the number yourself to check. Never wire money in response to an unsolicited call.