Identity theft in the U.S. is on the rise. Between 2019 and 2020 alone, the number of reported cases of identity theft increased by a stunning 53 percent. Identity theft comes in many shapes and sizes. Some cybercriminals use phishing emails or send out scam text messages and phone calls, while others might hack your devices or lead you to fake websites.
The most common causes of identity theft may be traced to credit card fraud or illegal acquisition of government benefits. But there is also one other type of identity fraud that is too often overlooked: tax identity theft.
What is Tax Identity Theft?
Tax identity theft takes place when someone steals information regarding your Social Security number (SSN) and then uses it to file a fraudulent tax return. These identity thieves would file the fraudulent tax returns in your name and then could either have the money mailed in the form of checks or just have the refunds deposited directly to their bank accounts.
What Do the Numbers Say About Tax Identity Theft?
Tax identity theft, also known as tax fraud, is one of the most common types of identity theft across the globe. According to the Federal Trade Commission (FTC) Consumer Sentinel Network, there were 89,391 reports of tax identity theft cases in the U.S. in the year 2020. That is 7.3 percent of the country’s 1,230,413 total identity theft cases. This places tax fraud in the top 5 types of identity theft, behind business and personal loans, miscellaneous identity thefts, credit card frauds, and government benefits applied for and received.
Tax fraud is less prevalent than other types of identity theft, thanks in part to the common goal of the partnership between the Internal Revenue Service (IRS), state tax agencies, and the private-sector tax industry. Together, they formed the group “Security Summit,” which aims to combat the criminal work of identity thieves. Since the inception of the Security Summit partners in 2015, the IRS reported that there was a significant decline of 80 percent in the number of taxpayers who reported that they were victims of tax identity theft.
Between 2015 and 2019, the IRS also reported that they managed to protect an estimated $26 billion in fraudulent refunds because they were able to stop a large number of confirmed identity theft returns. Moreover, an additional $1.7 billion was recovered for financial industry partners who were hit with cases of fraudulent refunds.
But even though the IRS has curbed cases of tax identity theft in the country, staying vigilant is still key to protecting your personal information. With the abrupt rise of different social media and digitalized information platforms, you have to be careful not to divulge any confidential personal data.
How Do You Know if You’re Already a Victim of Tax Identity Theft?
If you experience one of these scenarios, chances are that you have already fallen victim to tax identity theft:
- The IRS ships out a tax transcript that you did not ask for.
- You received a letter from the IRS about a potential fraudulent tax return that you did not file.
- The IRS stops you from electronically filing your tax return because they have detected a duplicate Social Security number. This means that your Social Security number has been registered in another filed tax return.
- You receive a notice from the IRS indicating that an online account has been registered under your name, when in fact you did not create one. It could also be that your existing online account was suddenly accessed or disabled without you doing anything.
- The IRS dispatches a notice saying that you still owe an additional set of taxes or refund offset.
- The IRS takes collection actions against you due to a tax return from a year when you did not file.
- You should also be careful when you receive a state unemployment form (Form 1099-G) that you did not ask for or when you are not unemployed in the first place. Furthermore, receiving a Form W-2 from a company that you’re not linked to or haven’t worked with for at least one year is another sign that you’re a victim of tax identity theft.
What to Do if You Think You’re a Victim of Tax Identity Theft
Remember to always stay vigilant and contact the IRS right away to discuss any issues of potential tax fraud cases.
When the IRS detects a tax return filing that they are skeptical about, they will usually contact you so that they can verify if you’re really the one who filed the return. If you receive such notice, don’t ever ignore it. It’s important to respond immediately to the IRS’s inquiry and work with them in putting a stop to any potential tax identity theft. It may take a few days or more to resolve the issue, so it’s a must that you contact the IRS immediately to save you from prolonging your case.
You can also file an identity theft report through the FTC’s online platform. Simply follow the instructions there, choose the option for reporting a potential tax identity theft case, fill out the necessary information, and complete the form. Afterward, the FTC will either send you an e-mail or call you on your provided mobile number to discuss the matter further.
How Can You Protect Yourself From Tax Identity Theft?
They always say that prevention is better than cure, and that also applies to protecting yourself from tax identity theft—or any type of identity theft, for that matter. Use the following tips to ensure your personal information is safe from identity thieves.
Avoid Phishing Emails and Report Them to the IRS
It’s easier than you might think to spot phishing emails. Often, these come from questionable email addresses composed of repeated letters and numbers. It’s best to avoid opening these emails. If you do open them, never fill out any form that they might request you to complete, and don’t click on anything in the email, as it might lead you to fake websites that could put your personal information at risk. If you encounter a phishing email related to your tax return or filing, report the affiliated email address to the IRS to help shut down these cybercriminals.
Secure Your Gadgets
When it comes to using computers and mobile phones, there’s no harm in taking every safety precaution you can. If you’re like most people, you often use your gadgets to make cashless transactions and perform digital errands that require you to input your private information, including your credit card number, address, and other confidential data. When using your phone or computer to complete a transaction on an online platform, make sure that you log out after. Moreover, you could also use encryption programs and security software to further protect you from hackers and cybercriminals.
Create Strong Passwords
Never underestimate the value of strong passwords, especially when it comes to protecting yourself against the risk of identity theft. The best passwords are a combination of characters and numbers that would be impossible for a stranger to guess. It’s also important to use different, strong passwords for each of your online accounts. That way if one account is hacked, your others will be safe.
If you struggle to remember those strong passwords, consider using a password manager rather than making your passwords easier. A password manager doesn’t just remember your unique passwords for each website or app, but it will also suggest new and stronger credentials, or let you know if one of your passwords is found to be breached.
Request for an Identity Protection PIN (IP PIN)
Another safety precaution that you could take to avoid becoming a victim of tax identity theft is to get your own Identity Protection PIN (IP PIN). This is a six-digit number that you can request from the IRS that prevents someone from filing a fraudulent tax return under your name. They may use your correct Social Security number, but they cannot complete the filing because they don’t know your IP PIN.
If you want to get your own IP PIN, go to the IRS’s online Get an IP PIN tool, and create an account or log in to your existing one. You must also pass their strict identity verification process before you could get your own IP PIN. It’s a rigorous process, but it’s well worth the effort.
Use a Security Software to Protect You From Tax Identity Theft
Alongside the helpful tips that you just read, a comprehensive security software can help to safeguard you from tax identity theft, as well as other forms of identity theft. Norton 360 with LifeLock is a unique integrated plan that provides you with all-in-one protection from identity theft. Simply setting up this service will safeguard your personal information and devices through a comprehensive set of tools, including the LifeLock Identity Alert System, which immediately alerts you to potential breaches concerning your Social Security number.
Norton 360 with LifeLock offers a flexible array of plans to choose from — all of which you can put to work with up to 25% off your first year of service.