Identity Theft is the unauthorized use of your personal information, such as name, social security number, or other identifying information without your permission to commit fraud. The identy theft problem is rapidly growing. Bureau of Justice Statistics reported in September 2015 that 17.6 million U.S. residents 16 years old and older were the victims of at least one incident of identity theft. This includes all types of identity theft however, tax-related identity theft continues to be a major issue for taxpayers.
During 2009 the IRS officially began implementing systems to track identity theft and to assist taxpayers untangle the problems it caused for them and the tax system. In just two years after implementation, the number of taxpayer accounts where identity theft indicators were placed increased 153%, from 254,079 in 2009 to 641,052 in 2011. To date, the IRS has placed identity theft indicators on well over a million taxpayer accounts.
The result of this Identity Theft and the use of stolen social security numbers and related data to file purported tax returns is to loot the U.S. Treasury out of billions of dollars a year.
There are two main types of tax identity theft that involve individual taxpayers:
Refund theft occurs when a thief uses your name, social security number, and date of birth to file a purported tax return to claim a refund. The thief does not use your financial tax information (just your Identity so the system accepts the purported return) on the return. They do not steal a refund you may be entitled to. Generally, they make up numbers and related documents, such as W-2's and utilize refundable tax credits (credits were no payment into the system is required) to request a refund. If the thief files the tax return before you do, the thief may receive the refund they claimed and your return will not be accepted because it is the second one to be filed for the specific tax year. Specific steps must be taken with the IRS to prove your identity and have the fraudulent return flagged and deleted and your legitimate return accepted.
Employment theft occurs when the thief uses your SSN to get a job. The thief's employer reports income earned to the IRS, generally using a W-2, utilizing your SSN. When the IRS does computer matching of your return and filed W-2's it appear that you did not report all of your income. This can cause the IRS to send you a notice demanding payment for the unreported income on your tax return including penalties and interest. This could also be the could be the origin of an audit by the IRS.
There are many steps that need to be taken to unravel the problems either type of tax related identity theft can cause. We can solve this problem for you if you have been victimized. Contact us at the first sign your identity has been compromised and we can institute steps to disentangle you from this bureaucratic nightmare at the IRS.