Identity theft is a growing problem and your tax refund is not immune. The Treasury Inspector General for Tax Administration (TIGTA) issued a report estimating that the IRS could issue $21 billion in fraudulent tax refunds over the next five years and identity theft will account for a majority of the fraud. According to the report the IRS detected 938,664 fraudulent returns totaling $6.5 million, but TIGTA identified approximately 1.5 million additional undetected tax returns with potentially fraudulent tax refunds of greater than $5.2 billion. The IRS has assigned more than 3,000 employees to work on identity theft issues.

The instances of identity thefts involving tax fraud is also growing at a disturbing rate.  A report issued by the U.S. Government Accountability Office noted that there were approximately 642,000 incidents of identity theft in 2012, which has greatly increased from the prior year.

The thieves obtain an individual’s personal information and file a fraudulent return in the individual’s name claiming a refund.  The theft normally takes place early in the filing season before taxpayers have a chance to accumulate the necessary information to file a tax return and before the IRS has received information from employers, brokers and retirement/pension funds.  Therefore, filing tax returns as soon as possible will help reduce your risk of a fraudulent refund being claimed in your name.  Additionally thieves have been targeting the elderly and low income taxpayers including children that may not have a filing requirement because the theft is less likely to be reported.

According to the IRS, here are some possible indications that a fraudulent return has been filed in your name:

  • You receive notices stating more than one tax return for you was filed,
  • You have a balance due, refund offset or collection actions taken against you for a year you did not file a tax return, or
  • IRS records indicate you received wages from an employer unknown to you.

As technology increases efficiency within our lives it also increases opportunities for thieves to profit on some else’s identity.  It is important to note that the IRS does not send e-mails telling you that you are getting a refund or that you are being audited.  The IRS offers the following tips on how identity theft can be prevented:

  • Don’t carry your Social Security card or any document(s) with your SSN on it.
  • Don’t give a business your SSN just because they ask. Give it only when required.
  • Protect your financial information.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

 

For more information, email luke@meara.com.