Don't Become a Victim of Tax Identity Theft

Filing tax returns for most people doesn’t rank with going on vacation or winning the lottery. Thus, when the Internal Revenue Service says it received a second tax return with your information, it’s obviously not because you enjoyed the process so much you filed again.

What’s happened is that you’ve become the victim of tax identity theft.

You can now count tax identity theft among our world’s ever-growing personal security concerns. The IRS on its website has a lengthy section reporting legal actions resulting from tax identity theft. Here are two examples straight from its website:

“Florida Man Sentenced in $12 Million Identity Theft Tax Refund Fraud Scheme: On June 5, 2013, in Miami, Fla., Jesus Calvo  was sentenced to 58 months in prison, three years of supervised release and ordered to pay $9.2 million in restitution to the IRS for his role in an identity theft tax refund fraud scheme. In addition, Calvo agreed to forfeit two houses, five cars, three bank accounts, high-end watches, jewelry and cash.”

“Alabama Man Sentenced for Stolen Identity Refund Fraud: On April 24, 2013, in Montgomery, Ala., Kenneth Jerome Blackmon Jr.  was sentenced to 51 months in prison, three years of supervised release and ordered to pay $197,839 in restitution. Blackmon pleaded guilty in January 2013 to aggravated identity theft and access device fraud. According to court documents, Blackmon used stolen identities to file false federal income tax returns with the IRS.”

Tax identity theft causes many problems for its victims. For example, when the IRS suspects identity theft, it delays refunds for lengthy periods as officials try to sort out who did what to whom, and when.

It’s a mess. And it’s getting worse.

One popular and persistent strategy employed by thieves to steal tax identities is to send threatening emails purportedly from the IRS. These emails typically say dire consequences are in store unless the recipient clicks on a link in the email — which captures their information.

Another frequent, and smellier, tactic is to hunt in garbage cans for confidential information.

Actually, there are multiple methods thieves can use to hack, steal or copy your vital information. Nevertheless, there are ways to protect yourself against tax identity theft:

Never click on a link or an email attachment claiming to be from the IRS — the IRS doesn’t send emails on these subjects. Instead, forward the suspicious email to your tax adviser or, if you don’t have one, the IRS.

Shred your financial information.

Use firewalls and intrusion protection on your home computer if it contains your personal financial information.

Don’t give out your Social Security number unless it’s absolutely necessary. Don’t hand it over just because someone asks for it.

File tax returns as early as you can.

Accounting firms are seeing more and more examples of attempted — or successful — tax identity theft. It’s in your interest to research the subject and consult your tax adviser.

As they told us in school, the only bad question is one you don’t ask. Not knowing about tax identity theft can be a life-changing experience. And not in a good way.

Tagged 1099, Accounting, Identity Theft, IRS, Taxes