Tax Return Identity fraud and steps you should take to prevent it

Tax refund identity fraud occurs when a criminal uses an individual’s personal information to submit fraudulent information to the Internal Revenue Service (IRS). There are multiple ways this can be done. The most common type of tax return refund fraud involves obtaining the victim’s name, address and Social Security Number and filing fraudulent tax returns in order to receive refunds from the IRS. The income and other information submitted with the return is usually made up by the criminals in order to maximize the refunds they receive including the earned income tax credit (EITC) and other refundable credits. Usually, the victims find out about this type of identity theft when they go to file their tax returns and the IRS kicks them back saying they already filed a return that year.

Another type of identity fraud involving taxes is when the criminal uses the victim’s information to obtain employment. Usually, the fraudster is in the country illegally and cannot obtain employment using their own information. The employers submit W-2s and 1099s to the IRS for the money paid to employees and independent contractors and of course, the victims do not report this on their returns as they are unaware their Social Security Number has been compromised. Usually, the victims find out they are a victim of this type of tax fraud when they receive an audit letter from the IRS indicating they failed to include income on their tax returns.

The first thing you need to do if you become a victim of tax return identity theft is to file Form 14039: Identity Theft Affidavit with the IRS. You can get a copy of the form at WWW.irs.gov in the forms section of the website. You can submit the form by mail or by fax, but if you fax it follow up by sending an originally signed form by certified mail with a return receipt. Remember you should also report the identity theft to the various state departments of revenue. Beware that sometimes criminal will file out of state, a new resident, or part year resident returns in states you do not live in to maximize the amount of the theft. Also if you live in an area like New York City that has a local tax you must notify them as well.

If you are a victim of identity theft here are 10 additional steps you should take

  1. File a police report.
  2. If you have identity theft insurance, notify your insurance company of the claim.
  3. Contact banks and financial institutions and have all credit and debit cards reissued with new numbers.
  4. Order a background check.
  5. Contact the credit bureaus and place a fraud alert on the credit report:
  6. If the theft involved the internet, file a complaint with the Internet Crime Complaint Center at www.ic3.gov/default.aspx.
  7. Call the Social Security Hotline at 800-269-0271 to report a stolen Social Security number.
  8. If mail theft was involved, report it to the US Postal Inspection Service. You can call 888-877-7644 to get the number for the local Postal Inspector.
  9. Make sure you maintain a log of everyone you speak with, including the date and time of the call.
  10. Maintain copies of all correspondence relating to the identity theft.

About Dr.Bob

Dr. Minniti is the President and Owner of Minniti CPA, LLC. Dr. Minniti is a Certified Public Accountant, Certified Forensic Accountant, Certified Fraud Examiner, Certified Valuation Analyst, Certified in Financial Forensics, Master Analyst in Financial Forensics, Chartered Global Management Accountant, and is a licensed private investigator in the state of Arizona. Dr. Minniti received his doctoral degree in business administration from Walden University, received his MBA degree and Graduate Certificate in Accounting from DeVry University’s Keller Graduate School of Management, and received his Bachelor of Science in Business Administration degree from the University of Phoenix. Dr. Minniti teaches graduate and undergraduate courses in accounting, fraud examination, fraud criminology, ethics, forensic accounting, external audit, and internal audit, at DeVry University, Grand Canyon University, Northwestern University, and the University of Phoenix. He designed graduate and undergraduate courses for Grand Canyon University, Northwestern University, and Anthem College. He is a writer and public speaker. He has experience in forensic accounting, fraud examinations, financial audits, internal audits, compliance audits, real estate valuations, business valuations, internal control development, business continuation planning, risk management, financial forecasting, and Sarbanes-Oxley compliance work. Dr. Minniti is an instructor teaching continuing professional education classes for the American Institute of Certified Public Accountants, Compliance Online, CPE Link. AccountingEd, Global Compliance Panel, Clear Law Institute and various state CPA Societies.

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