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How to Help Prevent Tax Identity Theft & What to Do If You're Affected

Personal Finance
A happy man filing his taxes on a laptop

Paying income taxes is tough enough without having your tax refund stolen because of tax identity theft. To help minimize the chances of this happening, there are steps you can take to help protect yourself as the deadline for filing your 2019 tax returns looms. And if you're affected by tax return identity theft, there are steps you can take to help minimize any potential damage.

Defining Tax Return Identity Theft

If you're not familiar with the term, tax identity theft (also sometimes called tax return identity theft) refers to having your identity stolen by someone who is trying to pocket any tax refund you might be due. It can also involve a fraudster filing a fake tax return before you submit yours, claiming a refund with falsified data on the return and then hijacking the refund check.

There's another variation of this crime that can also cause you a lot of trouble. It occurs when a non-U.S. citizen who lacks eligibility to work in this country legally, and they use your Social Security number (SSN) to obtain and maintain a job.

Spotting the Warning Signs

The problem of tax identity theft is widespread enough that the IRS proclaims a "Tax Identity Theft Awareness Week" during the last week of January every year. So how might you know whether you're about to be — or already have been — affected by this insidious crime?

These are the main possible tip-offs, according to the IRS. Be on the alert if someone from the IRS or a professional tax preparer tells you that:

  • IRS records indicate you received wages or other income from an employer you haven't worked for.
  • You owe additional taxes beyond what you should owe based on your own tax return's determination.
  • At least two tax returns have been filed using your SSN.
  • A "refund offset" is being collected. In other words, the IRS plans to reduce a refund you were owed to offset an alleged tax liability that you didn't know you had.
  • The IRS has sought to collect payment for an alleged tax liability for a year when you didn't file a tax return because you weren't required to.

Keep in mind that the IRS will never email you about any of these warning signs. An email that's asking you for sensitive personal information, and supposedly from the IRS, may actually be a fraudster attempting to steal from you.

Preventing Tax Identity Theft

To help avoid this crime, consider reviewing your Social Security earnings statement and credit report annually to look for any indicators of identity theft. In addition, here are some steps that the IRS recommends you take to help avert it:

  • Guard "personally identifiable information" online — yours as well as that of a spouse or any dependents.
  • Unless you have a specific need to do so, never carry your Social Security card in your wallet.
  • Keep your tax returns securely stashed away. When you're ready to discard them, burn or shred any hard copies.
  • Use anti-virus software. It doesn't guarantee your identity will never be stolen, but it can be an important first line of defense. Additionally, avoid using simple or predictable passwords, choose unique passwords for each site you use, and regularly change your passwords.
  • Don't get lured in by "phishing" emails — emails from fraudsters posing as real people or companies. Look out for emails that ask you to confirm personal information, are poorly written, or have suspicious email addresses or websites. Their tricks are getting more and more sophisticated, so skepticism is your friend.
  • Similarly, be on guard against phishers who use the phone to pose as a representative of your bank, credit card company or even the IRS. Financial companies and the IRS will never call you or request personal or financial information over an email.
  • If you aren't sure about the true source of an email, don't download any attachments from it or follow any links that it contains.

Responding to Tax Identity Theft

Even if you've taken all the usual precautions, and you're still affected by tax identify theft, there are still steps you can take to respond to the situation.

For starters, the Federal Trade Commission (FTC) recommends that you file a complaint with them, contact one of the three major credit bureaus, and contact your financial institutions such as your bank and credit card issuers. The IRS also urges you to "continue to pay your taxes and file your tax return, even if you must do so by paper." Beyond that, contact the IRS immediately to start addressing the issue. They will likely have you submit a Form 14039, which is a short identity theft affidavit form.

Tax identify theft can be a major issue if it goes undetected, but there are ways to help prevent and mitigate it. Once you're armed with a thorough understanding of how to help prevent and address identity theft, you can continue your annual tax-filing ritual.

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.