Here’s a message you really don’t want to receive from the Internal Revenue Service: Someone has already received your tax refund.
More than 237,500 taxpayers filed affidavits with the IRS in the first nine months of 2016 reporting that they had been victims of identity theft, according to the agency, although that number was down 50 percent from 2015. During that same period, the IRS stopped 787,000 identity theft returns that had sought more than $4 billion in refunds.
Scammers can steal taxpayers’ identity in a variety of ways, from data breaches at retail stores, medical facilities and the IRS itself to theft of paper mail. Scams often involve a web of thieves, with one group stealing identities and another filing bogus tax returns.
[Read: 9 Tax Changes to Know Before Filing Your 2016 Return.]
The IRS, tax preparers and online tax preparation services have taken a variety of measures to combat fraud.
“We are requiring our customers to have stronger passwords,” says Lisa Greene-Lewis, a CPA, tax expert for TurboTax and U.S. News contributor. The company also is requiring multifactor authentication to log in, where access is granted after providing more than one piece of information to verify your identity.
Last year, the IRS instituted new security measures for all online filing. Some states are requiring driver’s license numbers with returns, figuring that a thief who acquired a taxpayer’s Social Security number didn’t necessarily acquire his or her driver’s license number as well.
If someone has filed a fraudulent tax return in your name, that means they have your Social Security number and can engage in other financial fraud. The first step is locking down your financial accounts to avoid further damage.
“If they stole your identity for a tax return, they’re probably into your credit cards next,” says Jeff Schnepper, a tax attorney in Cherry Hill, New Jersey, and the author of “How to Pay Zero Taxes 2017: Your Guide to Every Tax Break the IRS Allows.”
Scammers usually file returns as soon as tax filing opens, hoping to receive refunds before the real taxpayers report their fraud. If the IRS flags problems with your return, you’ll get a letter before any refund is issued, which gives you the opportunity to tag the initial return as fraudulent and go on and file normally. But if the IRS doesn’t catch the fraudulent return, you won’t find out about it until you file your return electronically and get a message that your return has already been filed. If you file a paper return, you’ll receive a letter from the IRS informing you a return has already been filed in your name.
[See: Answers to 7 Burning Tax Questions.]
If the scammer gets your refund, you may have a long wait before you see any money yourself. It may take six months or longer for the IRS to agree that it sent someone else your refund and actually send the money to you.
“[The IRS has] been devastated by budget cuts,” Schepper says. “They don’t have the staff to do this.”
Here are eight things to do if someone has filed a fraudulent tax return in your name or you have recently been a victim of ID theft and fear it might lead to a fraudulent tax return:
File Form 14039. If you receive a letter from the IRS or otherwise suspect you’re the victim of ID theft, you should fill out and mail this form, called Identity Theft Affidavit, to the IRS with a copy of your driver’s license, Social Security card or passport.
Put a credit freeze on your accounts. Call the three major credit bureaus — Experian, TransUnion and Equifax — and ask that your credit be frozen. Now no one can request new credit in your name. Keep in mind that if you apply for a new cellphone or utility account, or otherwise agree to a credit check, you’ll have to lift the freeze long enough for the check to be done.
Check your credit card accounts. Make sure no one has charged anything to your credit card accounts, changed your address or otherwise done anything you did not authorize. Consider changing passwords to online accounts and deleting your credit card information from online shopping sites.
File a police report. Your fraud may be part of a larger local fraud scheme. The more information the police have, the better chance they have of cracking the criminal enterprise. Depending on the size of your local police department, there may even be a division that deals with financial crimes or ID theft.
File a report with the Federal Trade Commission. The FTC also has helpful information on its website for taxpayers who face this situation.
Watch for scams. The IRS will not contact you via email or phone to ask for financial information. Don’t give out any personal information to phone callers and don’t click on links in emails that purport to come from the IRS. Only respond to paper mail correspondence from the IRS.
[See: 9 Red Flags That Could Trigger a Tax Audit.]
Get a PIN for tax filing. You can add an extra layer of protection to your tax filing if you use an IRS-provided personal identification number. You can request a PIN if the IRS has invited you to or if you filed your tax return from Georgia, Florida or the District of Columbia. But once you get a PIN, you can’t file without it.
Only work with reputable tax preparers. Tax preparers have been both victims and perpetrators of scams. If you hire someone else to do your taxes, hire someone with good references and experience. You can check whether preparers hold credentials recognized by the IRS.
More from U.S. News
9 Red Flags That Could Trigger a Tax Audit
7 Most-Missed Tax Deductions and Credits
10 Smart Ways to Spend Your Tax Refund
What to Do If Someone Files a Fraudulent Tax Return in Your Name originally appeared on usnews.com
