Taxes

Identity thieves gear up to steal your tax refund

Jan. 14, 2014 at 9:37 AM ET

What's worse than filing your taxes? Having an identity thief steal your return check. 

Identity theft is already a serious problem — the No. 1 complaint to the FTC — and tax-related identity theft is a growing part of this crime spree. In 2010, about 15 percent of all identity theft complaints to the FTC dealt with tax returns. In 2013, that jumped to 43 percent.

“It’s a lucrative crime and relatively easy to commit,” said Adam Levin, chairman and founder of IDentity Theft 911. “All you need is a Social Security number and some counterfeit documents. It’s much easier than selling drugs or stealing cars and a lot less risky for the bad guys.” 

One way to prevent this from happening is to file early. Why? The IRS may be able to process your return before the identity thieves can.

“It really can be a race to the IRS,” said Steve Toporoff, coordinator of the ‎Identity Protection Program at the Federal Trade Commission (FTC). “They usually don’t have access to W-2 forms, so they just make up income numbers and hope their phony return gets through the process,” Toporoff explained.

If the crook is successful, your legitimate return will be kicked out and the refund denied because the IRS computers will show that you were already paid.

You will get your money — eventually, but it could be delayed for months. The IRS says a typical case can take about 180 days to resolve.

The government fights back 
Identity theft is a top priority for the IRS. On its website, the agency says it’s taking “new steps and strong actions to protect taxpayers and help victims of identity theft and refund fraud.”

The IRS has more than 3,000 employees now working on identity theft issues. More than 35,000 employees who deal with taxpayers have been trained to recognize return fraud and to help the victim when it happens.

The agency’s criminal investigation unit has focused on finding and prosecuting the thieves who commit return fraud. In fiscal year 2013:

  • The IRS started 1,492 criminal investigations related to identity theft, up 66 percent from the year before
  • Indictments and sentencing doubled — the average prison term was more than three years.

“We applaud the IRS for taking steps to deal with this problem,” said Eva Velasquez, president and CEO of the Identity Theft Resource Center (a non-profit organization that helps victims of ID theft). “They have thwarted billions of dollars in fraud, but there are still billions of dollars being stolen and more needs to be done.”

Know the warning signs 
Most victims find out there’s a problem when they get a letter from the IRS that says they’ve filed more than one return or that they earned wages from an unknown employer (that normally means someone stole your SSN to get a job).

If you get such a notice, contact the IRS Identity Protection Specialized Unit right away at 800-908-4490, extension 245. There’s paperwork you need to file and things you should do as quickly as possible because you are now vulnerable to all types of identity theft.

“The Social Security number is the Holy Grail,” Velasquez told me. “Once you have enough information to file a phony tax return, you have enough information to open new lines of credit, commit medical identity theft, and take over financial accounts.”

The refund thieves may also try to claim your tax refund next year, so if you’re a victim get a verification PIN code from the IRS that you must use to file future returns.

Do not respond to an unexpected email or text message that claims to be from the IRS. The IRS does not do business that way. Their initial contact is always by mail.

Protect yourself
You can’t prevent tax-related identity theft — we’re all vulnerable, but there are things you can do that will reduce your risk of becoming a victim.

  • If you file by mail, do it at a post office, not from an unlocked mailbox in front of your house.
  • If you file electronically, use a secure computer on a secure network. It's okay to check the weather using a WiFi hot spot, but don’t do anything financial or tax-related on a public WiFi network.
  • Get your return done as soon as you can. It really is in your best interest to file as early as possible.

The FTC has declared January 13-17 Tax Identity Theft Awareness Week. There are seminars, webinars, text chats and other special events taking place all across the country this week.

More Information:

Herb Weisbaum is The ConsumerMan. Follow him on Facebook and Twitteror visit The ConsumerMan website.



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