Tax Identity Fraud on the Rise: What To Do If You Fall Victim– May 07, 2013

Posted by Robert Towne, MT

With the April 15 tax filing deadline still fresh in our memories, it’s a good time to shed some light on a growing problem — tax identity (ID) fraud. Tax ID fraud occurs when a person steals someone else’s identity — whether by using a Social Security number from a deceased veteran or infant, or by illegally purchasing a list of Social Security numbers of living individuals. The fraudster files a false tax return and then collects the refund. Often individuals are not even aware their identity has been stolen until they file their return and are notified by the IRS that a return has already been filed under the same Social Security number.

While it may sound unbelievable, it happens more than you might think and seems to be on the rise. Acting IRS Commissioner Steven Miller, as reported in the Journal of Accountancy, testified to the Senate Finance Committee on April 16th that the IRS has suspended or rejected more than 2 million suspicious returns this filing season. A recent estimate from the Treasury Inspector General for Tax Administration reported that tax ID theft could cost the government $21 billion in fraudulent refunds over the next five years.

The Obama Administration has included several significant tax fraud prevention proposals in its fiscal year 2014 budget plan, including limits on access to death records and omitting Social Security numbers on wage statements.

While the government works on prevention at a systemic level, it’s important to know what to do if you believe you have been a victim of tax ID fraud. Below are a few recommendations from the IRS:

  • If your ID is stolen — whether you believe the ID was or was not used inappropriately for tax purposes:
    • File Form 14039, Identity Theft Affidavit
    • Report to the local police, the three major credit bureaus (Experian, Equifax and TransUnion), and your financial institutions
    • Respond immediately if you receive an IRS notice reporting that more than one tax return was filed under your name or other suspicious tax-related activity has occurred
  • If you are claiming to be a victim of ID theft, be prepared to provide the IRS with the following:
    • Valid U.S. federal or state government-issued identification
    • Evidence of the ID theft (Form 14039 or police report)
  • If you have knowledge of another person filing a federal tax return with a stolen SSN or EIN:
    • Contact your accountant, who will refer your information to the Criminal Investigation Fraud Detection Center.
  • If you receive an email from the IRS requesting personal information:
    • Be aware that the IRS does not request sensitive information by email
    • Forward a copy of the email to IRS at phishing@irs.gov

The bottom line is to always protect your financial information, be careful who you share it with and act immediately if you believe your information has been comprised.

For more information on this topic, contact a member of your Cohen & Company service team or visit the IRS website to review its Taxpayer Guide to Identity Theft.

 

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.