How to handle tax identity theft

Tax identity theft can be extremely serious. It happens when someone gets hold of your social security number and files your tax return instead of you. While this may sound benign at a first glance, the fact that the criminal will be “running away” with your refund check shows just how serious the matter is. All your work with the top tax debt relief companies will be for naught, for example, and someone else may get the benefit. But the good news is that you can learn how to handle tax identity theft. In this article, we will explain what tax identity theft is, how to protect yourself from it as well as spot early warning signs, and how to deal with it so it has a minimal impact on your life.

What is a tax identity theft?

In a nutshell, tax identity theft happens when your “identity” is stolen. This means that a criminal managed to acquire your personal information, complete with your social security number, and uses it to create a forged tax return. This usually happens early in the filing season, when most people are still not able to file their returns. The fact of the matter is that a good number of taxpayers are searching for last minute tax filing tips instead of filing their taxes early in the season. The criminals know and exploit that fact. And then they get your refund money. And then you need to learn how to handle tax identity theft.

person looking at an empty wallet
Being a victim of tax identity theft can leave you with an empty wallet.

These days, it is a lot easier to fall victim to tax identity theft. With taxpayers being able to file their returns in an electronic manner, it is much easier for someone to present themselves as you. Especially if they have stolen all your personal information. Speaking of which:

The best thing you can do is to protect your information and not worry about tax identity theft at all

To start with, you will want to secure your personal computer, as well as your mobile phone. Using security software on your PC is essential, as it comes with a firewall and malware/virus protection. You may also want to install additional encryption software if you have any sensitive digital data. Whenever you need to create a password, never fall back to the passwords you’ve already used. Create a strong, unique, password instead. A good way to do so is to use a long phrase, one that you can remember. Then combine that phrase with numbers and special characters. An example of this would be WhoMadeMeCreateaPassword@50. Also, whenever you are offered multi-factor authentication, take it.

Multi-factor authentication is critical in protecting yourself from identity theft. The way it works is that every time you are trying to log in to a virtual service you are sent a security code to your mobile phone or on your email. Obviously, it is much better to set up multi-factor authentication on your phone.

As for your personal information, you may want to consider it extremely valuable. Because it is. Think of it as money, you don’t want to have it lying around where just anyone can snatch it. This is also a good way to protect yourself from common IRS tax scams, as many of them utilize some of your personal information. The less anyone outside of your social circle knows about you, the better. You also might want to be careful with your information even when speaking with friends – you never know who is listening.

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How do criminals get your information?

applications on a phone
Most phishing attempts will come through your email.

There are numerous ways in which someone can get hold of your personal information. However, aside from someone stealing your tax documents or financial statements, the most common way is through phishing/scam emails. Basically, criminals will send you an email that looks official and will ask you to click on a link. Once there, you will be asked to type in your information. And once you do so, it gets stolen. And, you’ve guessed it, you will need to learn how to handle tax identity theft!

While you may think “I would never click on a link such as that“, be aware that there are two distinct situations where you might be very enticed to do so. First, the email may state that failure to react will lead to severe penalties. Second, you may be given an incredible opportunity to boost your tax refund amount. In both cases, you may react before you have proper time to think. The best thing to do is to be extremely cautious with any links you get in an email. These days, phishing scams are so elaborate, that you almost cannot tell if it is real or not even if you are looking really hard.

To sum it up, you might want not to click on any links you get in an email, no matter the source. It is much safer that way.

How to recognize if your tax identity has been stolen

tax documents
Carefully examine any unusual tax documents that you get.

Most people do not realize that their identity has been stolen until it is too late to act. It is vitally important that you notice the early warning signs of tax identity theft. The earlier you are able to act, the higher the possibility that you will not suffer any consequences. Whether you are taking steps to get an IRS tax settlement or filing your returns as normal, you need to take note of any unusual activity. It can be somewhat difficult to figure out what is normal and what is not, though. The best thing you can do is to scrutinize any tax-related information you get. If anything looks to be out of the ordinary, investigate it.

Early warning signs

Let’s say that a criminal did manage to get your information and wants to commit tax identity theft. There are some warning signs that will notify you that something is wrong. For example, not being able to e-file your tax return due to a duplicate Social Security number is a dead giveaway. But you may also get a tax transcript in your mail, despite not requesting it. Here are a few more warning signs to look out for:

  • Getting an EIN (Employer Identification Number) without requesting it
  • Getting a notice from the IRS that you have created an online account without you doing so
  • You get a letter from the IRS about a tax return that you did not file
  • You get a notice from the IRS that your online account was accessed/disabled without any activity on your part
  • The IRS income records show an employer you don’t know anything about

While all these signs look very straightforward, sometimes you might just chalk it up to “weird”. And that is exactly what so many people do and not even realize that they are a victim of tax identity theft. But despite the best efforts to protect yourself and see the warning signs, tax identity theft can happen to you. Let’s see what you can do about it.

How to handle tax identity theft

If you happen to find yourself in a tax identity theft situation, here’s what you need to do:

  • Contact the IRS
  • Submit an IRS Form 14039
  • Continue paying taxes as normal
  • Set up a fraud alert on your credit report
  • File a complaint with the FTC
person meditating and thinking about how to handle tax identity theft
Try to remain calm throughout the process.

The most important part is to immediately contact the IRS. Do not think about anything else, just let them know what is going on. The earlier you do so, the better. If you call the IRS, they will instruct you to complete the IRS Form 14039, Identity Theft Affidavit. You can fill this form on your own accord if you notice that your e-filed return is rejected due to a duplicate filing of your Social Security Number.

What to do if the IRS contacts you about tax identity theft?

If the IRS identifies tax identity theft before you, they will send you a letter or a notice from their Taxpayer Protection Program. Most of the time, you will also receive a Letter 4883C that will serve as your means of verifying your identity. Have the letter with you when calling the toll-free Taxpayer Protection Program number and follow its instructions. You will also need a copy of your last year’s tax return.

The customer service representative will then help you verify your identity. But it may also happen that you may need to pay a visit to the IRS Taxpayer Assistance Center in person. When the IRS contacts you directly about tax identity theft, you do not need to complete Form 14039 unless they instruct you to do so. That is the main difference between them contacting you and you contacting them.

What happens when you report tax identity theft to the IRS?

If you report tax identity theft to the IRS, you will need to file Form 14039 and attach it to your completed paper tax return before mailing it to the IRS. After some time, the IRS will acknowledge your affidavit and assign you to their Identity Theft Victim Assistance organization. You will then work with an identity theft specialist to assess the scope of the issue as well as address them. Basically, they will teach you how to handle tax identity theft in your particular case.

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While tax identity theft might be scary, it is nothing that you can’t fix by knowing more about taxes themselves. And the best place to learn about them is right here, at Consumer Opinion Guide! Browse our knowledge database, learn about taxes and tax relief, and find all the best tax relief companies in the country!

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