Identity theft is a major financial concern, especially in the area of tax returns. Millions of tax filers in the past decade have attempted to file electronic income tax returns only to find that someone has already filed a return using their Social Security numbers. These fraudulent filings are typically the work of scammers trying to commandeer taxpayers’ identities with the hopes of stealing their income tax refund. Of course, if scammers have enough information to try to steal a tax refund, they may also have enough information to access bank accounts or open a credit card under a stolen identity.
While these are serious financial crimes, there are a number of ways for individuals to protect themselves from identity thieves.
Watch for the signs
The sooner a person discovers that he or she is a victim of tax-related identity theft, the sooner he or she can take action to minimize the damage. The most obvious and common sign of trouble comes when a taxpayer attempts to file an electronic tax return only to get a message from the Internal Revenue Service (IRS) that someone else has already filed using his or her Social Security number. Even with filing returns by mail, the IRS may send a letter back stating that it already has a return on file. These are strong signs of attempted identity theft and should not be ignored.
Report the identity theft immediately
Individuals who suspect that they have been the victim of identity theft or attempted identity theft should immediately complete IRS Form 14039, an Identity Theft Affidavit. This is the form that taxpayers use to report fraudulent returns to the IRS. The form can be mailed, along with an individual tax return, according to the form’s instructions.
In addition to informing the IRS of the problem, identity theft victims should contact the Experian, Equifax, and TransUnion credit bureaus. These bureaus have standard procedures for reporting potential identity theft and can be very helpful to guard your other financial information. Additionally, reporting the identity theft to the Federal Trade Commission (FTC) may help the government identify and potentially stop the identity thieves. More information on reporting identity theft is available from www.identitytheft.gov.
Get an IP PIN
Taxpayers have access to a special tool for identity protection offered by the IRS, known as the Identity Protection Personal Identification Number, or IP PIN. The IP PIN is a six-digit number that the IRS assigns to taxpayers for inclusion with a filed tax return. When a taxpayer files a return with an IP PIN included, the IRS can confirm that the filer’s Social Security number matches the included IP PIN.
Individuals interested in obtaining an IP PIN must register for an online account with www.IRS.gov. Once there, the IRS will require the taxpayer’s email address, Social Security Number or Individual Tax Identification Number, tax filing status, mailing address, and one financial account number linked to his or her name. The IP PIN is valid for one calendar year and interested individuals must be assigned a new number each year. The application process may be a bit of headache, but is certainly much less of a hassle than trying to deal with identity theft.
Be careful with personal information
The most important step to prevent identity theft is to simply be careful and diligent in protecting personal information. Individuals should not send their Social Security numbers, addresses, birthdates, or other personal information in response to emails from people they don’t know. Criminals posing as the government, banks, or other financial institutions will often “phish” for personal information by sending emails that request that recipients to either reply with personal details or access a website where they will upload their information. The government and reputable companies will never ask for this kind of information over email or the internet and all emails with such requests should be discarded immediately.
You can find more information by reading, “How to Protect Yourself From Identity Theft”.
Identity thieves are persistent and their efforts can result in real trouble for their victims. Individuals need to keep their guards up if they want to avoid the headaches, hassles, and potential financial loss that comes with undoing the work of an identity thief. Stay vigilant and always cautious with your personal and identifying information. Peruse First Bank’s Security Hub for more information on fraud prevention and how to recognize potential threats.
Always feel free to reach out to a trusted advisor at First Bank Wealth Management to discuss tax mitigation strategies, your long-term retirement plan, and how to best plan ahead for the future.
By: David Frederick
|David Frederick, J.D., LL.M. is the Senior Vice President and Director of Client Success and Advice at First Bank Wealth Management and Adjunct Professor of Economics at Washington University. David may be reached by phone at 314-995-8764 or via email at [email protected].|