Protect yourself from tax identity theft

This year more than any other year, the IRS is seeing a huge increase in identity theft with tax returns. Previously, taxpayer identity theft was at 3%. This year the IRS is reporting closer to 20%. I’ve seen very, very few identity thefts in my time as CPA, but this year alone I’ve had over 60 customers encounter an issue.

Tax-related identity theft occurs when someone uses your stolen Social Security Number (SSN) to file a tax return claiming a fraudulent refund. Generally, an identity thief will do so early in the year. You may be unaware you are a victim until you try to file your taxes and learn one already has been filed using your SSN!

If the IRS notifies you with a letter stating that more than one tax return was filed or if your IRS records indicate you received wages from an unknown employer, your identity may have been compromised.

Steps to take after you become a victim

1. File a report with law enforcement.

2. Report identity theft at ftc.gov/complaint and learn how to respond to it at identitytheft.gov.

3. Contact one of the three major credit bureaus to place a ‘fraud alert’ on your credit records:

4. Contact your financial institutions, and close any accounts opened without your permission or tampered with.

5. Check your Social Security Administration earnings statement annually. You can create an account online at www.ssa.gov.

6. Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at IRS.gov, print, then mail or fax according to instructions.

Reduce your risk before you become a victim

  • Check your credit report annually.
  • Check your Social Security Administration earnings statement annually.
  • Protect your personal computers by using firewalls, anti-spam/virus software, update security patches and regularly change passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking.

Now more than ever, identity theft insurance is extremely important. I’ve seen clients have great success with LifeLock.

Also, I recommend freezing your credit when you don’t need it checked and lock your kids’ credit until they’re 18 years old. Additionally, immediately freeze the credit of a loved one who has recently passed away. These are easy targets for identity thieves.