Protect Yourself Against Tax Identity Theft

7/1/2013 | Written by: Karen Reed, EA

Until recently, except for safeguarding your social security number, there was not much you could do to protect yourself against tax identity theft. Now the IRS has come up with a way for taxpayers who believe they may be at risk to proactively alert the Agency about the potential for fraudulent activity in their accounts.

If you have ever had a situation in which there was a misuse of your personal identity information to obtain credit, you are a potential target for tax identity theft and the IRS advises that you submit form 14030, Affidavit of Identity Theft, even if you have not yet had a tax problem. When you file this form, the Agency will flag your account to identify any questionable activity.

Tax-related identity theft occurs when a person files a fraudulent tax return using a legitimate social security number belonging to someone else for the purpose of getting cash for a credit or refund. You may be a possible victim of tax identity theft if you (1) receive a notice from the IRS indicating that more than one tax return was filed in your name; (2) are notified of a balance due for a year that you did not file a tax return; (3) receive a notice stating that the income and payment information the IRS has on file does not match what you reported on your tax return.

Tax identity theft cases have been increasing every year.  According to the Treasury Inspector General for Tax Administration, it has become an epidemic, with more than a million incidents reported in 2011 and almost 1.8 million incidents during the 2012 tax year. The IRS has approximately two thousand employees working full-time on tax identity cases. As of March, 9, 2013, there were 249,000 cases in its inventory.

Since the beginning of 2013, the IRS has helped to resolve more than 200,000 cases. The Agency also has an expanded Identity Protection PIN (IP PIN) pilot program that has added an extra layer of security on the accounts of more than 770,000 taxpayers with previously confirmed cases of identity theft.