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Tax return identity theft: Not a victimless crime

April 24, 2013

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Although the internet serves many good purposes, it also makes you very vulnerable to identity thieves on a daily basis. Whether it’s a misspelled web address, fictitious request or hacked email account, the opportunities for identity theft have become abundant in recent years.

In an age of technology you no longer have to come face-to-face with a thief to be robbed penniless.

Typically, the term “identity theft,” conjures an image of a criminal getting their hands on your Social Security Number (SSN) and wreaking havoc with your personal or business credit. Indeed, this type of identity theft is a serious problem. But another tactic that has grown over recent years involves thieves invading the tax records of an individual or business.

Tax-related identity theft jumped from approximately 52,000 incidents in 2008 to over one million in 2012, according to a 2012 report by the U.S. Government Accountability Office. While that’s a tiny fraction of the 145.6 million individual returns filed, the impact on taxpayers directly involved can be significant.

Identity thieves can intercept tax records in several ways. The most common form of this fraud is what the IRS calls “refund fraud.” This is when a thief steals a legitimate taxpayer’s name and SSN and uses them to file a fraudulent return, claiming he or she is owed a refund.

Most thieves try to file early enough in the year that the actual taxpayer hasn’t yet filed his or her return. The IRS is more aware of this type of fraud, and has created safeguards and attempts to stop these fraudulent returns from being processed. However, some refunds are still being issued to the thief, because the name and SSN on the return appear legitimate, thus not sending up any red flags.

Other refund frauds involve phishing schemes. These are attempts to gain access to your private information, initiated through fraudulent emails and websites. Keep in mind that the legitimate IRS website is irs.gov. The IRS doesn’t use email or social media to request personal information or to provide a refund or initiate an audit. In some instances the IRS may notify you through mail or a telephone call for an upcoming audit or collection issue. But if there is ever a question to whether or not you are actually dealing with the IRS, contact the IRS directly. If you receive a phone call or letter claiming to be from the IRS, you can contact the IRS (a number of contact options are available at to determine whether the contact is legitimate. With a phone call, you also can ask for an employee badge number. Once you’ve confirmed the legitimacy of the call or letter, you can take whatever steps are appropriate.

How to safeguard yourself from identity theft
Remember that your best defense is your offense. When filing your tax return remember the key points to being vigilant:

•    File your return early, to ensure that identity thieves don’t beat you to it.
•    Shred any information with your Social Security Number and personal information, instead of tossing it in the trash.
•    Don’t respond to email links or online requests for personal information or passwords.
•    See something suspicious? Contact the IRS directly, and ask for a badge number.

What to do if you fall victim to identity theft? Contact a professional immediately.
Clark Schaefer Hackett has a team of specialists comprised of experienced CPAs, EAs and former IRS Agents who can answer any questions you may have. We specialize in IRS audits, collection matters and can assist you with interpretation and understanding complex IRS procedures and notices. Before becoming another victim of identity theft, we can help answer your questions and determine the legitimacy of any requests from the IRS.

Fred Francis is a Senior Accountant at CSH specializing in IRS controversies, and a member of the firm’s Professional Services Provider Industry Group. He can be reached at 937.226.0070 or [email protected]

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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