Tax Identity Theft: Everything You Need To Know

Consider this scenario: you attempt to e-file your yearly or quarterly taxes and soon realize that someone already filed with your Social Security number (SSN) or Employer Identification Number (EIN).

This is an all-too-common problem. Scammers use your name, birthdate, and Social Security number—information collected from sophisticated online data breaches or through sifting through the trash—to steal your identity and file a fraudulent return. Armed with personal information, scammers make up details about your employer, income, dependents and more in an effort to engineer a fraudulent refund.

While the IRS reported stopping 649,000 confirmed identity theft returns in 2018 and $3.1 billion in fraudulent refunds, tax predators still run rampant in cyberspace.

If you already face complex tax issues, the last thing you need to concern yourself with is this breach of security.

How Do You Know You’ve Been Hit?

Often, you don’t learn that you’re a victim until you attempt to file your tax return and the IRS rejects it because someone else already filed one under your SSN or EIN. Alternatively, you may get a letter from the IRS stating:

  • More than one return was filed under your SSN
  • You received wages from an employer (but the employer the IRS references is unknown to you)
  • You have a balance due, offset, or a collections action

The IRS estimates an average of 120 days to resolve a typical tax identity theft case. Most unfortunately, the burden is on you—the victim—to prove your identity is indeed true. And with the demands the daily grind brings, this should be the last of your concerns.

How Can You Stay on the Defense?

To stay ahead of predatory tax practices, protect your personal information (especially your SSN or EIN) online. The Federal Trade Commission offers these four tips to stay on the defense:

  1. Know who you share information with.
  2. Store and dispose of your personal information securely.
  3. Ask questions before deciding to share your personal information.
  4. Maintain appropriate security on your computers and other electronic devices.

Already Dealing with Tax Identity Theft?

If you have already been hit with a fraudulent tax return, here are steps you can take:

  1. Share the IRS letter or notice with your tax professional. They can help you respond to it.
  2. Complete IRS Form 14039, the Identity Theft Affidavit.
  3. File a local police report (most cities now allow you to do this online).
  4. File an identity theft report with the Federal Trade Commission.
  5. Set up fraud alerts with a credit bureau.
  6. Set up a system for monitoring your credit reports closely for at least the next year.
  7. Notify your financial institutions.
  8. If someone files a fraudulent return using your information, visit Block Advisors, a new offering for individuals who want one-on-one support for complex tax issues. You can leverage a tax advisor to submit your tax return by paper if the electronic copy was rejected.

Thankfully there are a few safeguards to better protect your tax identity. Take preventative steps to help better protect yourself or your business. Connect with Block Advisors to learn more about how we can limit your likelihood of tax identity theft.

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