Identity theft has become a massive problem for the federal government during the past few years. This affects your taxes when a criminal files a tax return using your social security number in order to claim a fraudulent tax refund. It should be noted that not every case of identity theft is a tax issue. If someone steals your credit card information, but doesn’t have access to your social security number, then that case would probably not become a tax issue at that time. However, you should take steps to ensure that no other information including your SSN does not become compromised. People can get your information thousands of different ways, but there are some things you can do to avoid identity theft.
If you didn’t know already, the IRS will NEVER contact you via phone or email. I repeat, NEVER. I don’t care if they sound like the most believable person ever. Hang up the phone and ignore them. If the IRS really needs to get a hold of you that badly, they will send you a notice. If someone contacts you via either of those mediums pretending to be an IRS employee, DO NOT give them any of your information. You should immediately send any suspected fraudulent emails to firstname.lastname@example.org. You should also report any scamming phone calls to the IRS at 1-800-366-4484 or you can report a scam online at the IRS Impersonation Scam Reporting.
One obvious red flag that your identity may have been stolen is if you file your tax return and you get a notice saying a return has already been filed for that social security number. If this occurs, you need to report this to the Federal Trade Commission. You should also contact one of the three large credit unions (Equifax, Experian, or TransUnion) to notify them of the fraud. Next you should fill out Form 14039 and return it to the IRS. You should also respond promptly to any notices you may receive from the IRS regarding the fraud. The longer you leave it alone, the more out of hand your situation will become. Lastly, you should always continue to file your tax returns. If you are a victim of fraud, they may require you to paper file your return. Event though this can be a pain, you still need to file it. Remember that interest and penalties can accrue on unpaid tax. While you may be able to get the penalties removed due to the fraud, the IRS does not normally waive interest accrued.
You can also get an Identity Protection PIN number to file with your tax return. This number helps ensure that your social security number will not be stolen or misused. A CP01F notice from the IRS invites you to get an IP PIN number because you could possibly be a victim of fraud. You are not required to get an IP PIN, but if you do, you cannot opt out in future years. The IRS will send you a CP01A notice with a new IP PIN number each year in December. If you have an IP PIN number you will file your return like you normally do, but you will simply include this number on your tax return. If you are required to have an IP PIN number because you previously opted to have one, your return will be rejected if you do not include this number on your tax return.
These are just a few steps and contacts to help you if you are ever caught in a fraud debacle. I won’t lie to you though. Dealing with the IRS when your social security number has been stolen is not a fun or easy task. It will be difficult, but if you nip it in the bud and take action as soon as possible, the process will be much less time-consuming and stressful. Have you ever had a problem with tax fraud? If so leave your comments below with any situations that could add additional information to this discussion!