Many of us know to be on our guard when it comes to identity theft as it relates to credit.
We know to check our credit reports regularly for suspicious activity, looking for fraudulent accounts.
What we don't realize, though, is that a new type of tax fraud is on the rise.
Identity thieves could be claiming your tax refund by filing early in the season.
They receive your refund, and you are left out in the cold.
Filing with Your Social Security Number
You're probably familiar with the way that identity thieves can steal your Social Security number and then use it to obtain loans in your name. However, some are starting to use your Social Security number to apply for a tax refund. A fraudster can claim deductions and credits that result in refund, and then have the refund sent to his or her specified address.
When you try to file your own tax return, you aren't allowed; instead, you receive a message that someone with your Social Security number has already filed paperwork. Unfortunately, this can be a real issue this year, with many filers seeing delays. Your real tax return might be held up due to delays that are the result of the last-minute fiscal cliff legislation. However, a fraudster doesn't need to wait to file a simple tax return with your Social Security number on it. He or she can do so now, and get a refund with your number before you are even eligible to file.
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This can be an extremely frustrating state of affairs — especially if the delay results in you being charged a failure to file fee.
What Can You Do to Avoid IRS Income Tax Refund Fraud?
First of all, it's important for you to do what you can to keep your Social Security number safe. However, it's almost impossible to completely avoid identity theft. As a result, you need to be ready, just in case your identity is stolen. You probably won't know that someone else is claiming a tax refund with your Social Security number until you actually file your return and find out your tax refund has already been paid out.
Once you realize the problem, though, you can work to fix it. The IRS has an entire department dedicated to cases of refund fraud. You will need to fill out a Form 14039, and attach required documentation to verify your identity. You can either fax or mail (use Certified mail if you go this route) supporting documents to the IRS. You might be asked for a state-issued ID card or driver's license, or other documents that prove your identity.
As soon as your identity is confirmed, the mistake can be corrected and you can file your tax return. You will eventually get your refund if you are entitled to one. However, the whole process can take up to six months, so if you are the victim of tax identity fraud, you can't expect to get your money very quickly.
When you realize that your identity is compromised, it's important that you move forward to find out whether or not you have other breaches that can cause problems. Check your credit report to make sure that accounts haven't been opened up in your name. It might make sense to place a credit freeze on your credit reports in order to keep the breach from spreading further. You can also report identity theft to law enforcement officials. If you do find that your credit report has been compromised, don't forget to report to the FTC, as well as to local law enforcement.
Tax identity fraud is on the rise. While you can eventually get your tax refund, chances are that the perpetrator won't get caught. Unfortunately, catching identity thieves — no matter the scheme — is difficult. Most of the time it just doesn't happen. But you will want to clear the matter up as quickly as possible, and take steps to further safeguard your identity.