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Taxes & Identity Theft

Identity theft is a growing problem. Most often we hear about identity theft that leads to credit card fraud or impacts someone's credit report. However, there is another kind of identity theft that is just as virulent and difficult to fix: tax-related identity theft.

Identity theft and taxes come together when someone tries to use your Social Security number (SSN) in order to file a fraudulent tax return.

This person then collects a refund they don't deserve. When you subsequently submit your filing, you'll receive a notice that you already filed your taxes.

Another example of identity-driven tax fraud is when someone uses your identity in an attempt to avoid paying their own taxes. This person may be in an income bracket where they know they will owe money rather than receive a refund. When the time comes to file their taxes, they use your Social Security number. The bill will be sent to you, not to them—leaving you on the hook for money you don't owe.

Your Social Security number (SSN) is an incredibly useful piece of information for identity thieves. In tax-related identity theft, SSNs play an especially key role, since the IRS tracks tax returns based on Social Security numbers. Be sure to only share your SSN with trusted sources.

If someone e-mails you from the IRS asking for personal information, like your Social Security number or other filing information, that is a good sign there is a problem. The IRS does not reach out to taxpayers in that manner, nor will they ever attempt to contact you via social media. Immediately report the situation to the IRS and considering filing an identity theft report.

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Warning Signs

Tax fraud is one instance when a credit report is not very useful. Credit reports focus on credit, not taxes. It's more likely that you will learn of tax-related identity theft in one of a couple ways:

  • You receive paperwork showing wages earned from an employer you never heard of. That probably indicates that someone else used your Social Security number to file their taxes and avoid paying on them.
  • You learn that more than one tax filing has been made in your name in a given year. You will know whether or not you already filed your taxes, so having another filing out there means you should contact the IRS fraud department as soon as possible.

There are two agencies that you should file a report with should you suspect yourself a victim of identity tax fraud: the IRS and the FTC.

Since this type of identity fraud is specific to taxes, you will need to file paperwork with the IRS immediately:

  • Complete an Identity Theft Affidavit (Form 14039).
  • Collect a photocopy of 1 document proving your identity.
    • Acceptable documents are listed on the affidavit.
  • Mail or fax the form to the appropriate address listed on the affidavit.

The IRS also provides a Taxpayer Guide to Identity Theft for details on how to cope when you find yourself in this unfortunate situation.

The Federal Trade Commission (FTC) is the other place to go to file an official record of identity theft. The government agency has set up a website to help guide you when reporting ID theft.

You may also choose to place a fraud alert on your credit report with one or all three of the major credit bureaus:

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