Tax-time theft

What you need to know about tax-related identity theft

Taxpayers have more to worry about these days than just forms and deadlines. The IRS is warning people to watch out for identity theft as well.

The IRS is working closely with states and the tax industry to create a more secure system but it is urging taxpayers to be careful to protect their own personal information.

1 Why you should worry Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. In 2015, the IRS stopped roughly 1.4 million confirmed identity theft returns, totaling $8 billion. The IRS says that while it has made significant strides in recent years to address the issue, it remains one of its top concerns.

“That is the scary part about it, they are talking about how many they caught but they are opaque about how many cases are out there,” said Mark Ciaramitaro, vice president of tax products at H&R Block. “It has become the biggest strategic threat the IRS faces.”

2 How it happens Ciaramitaro says there has been astronomical growth in these kinds of cases largely due to an increase in data breaches, which expose key personal information such as date of birth and social security number. Criminals can then use this information to file a false return and receive a refund far before the IRS can verify if the information is correct.

Steps to prevent it There is no silver bullet to protect

3 your information. But follow basic precautions to protect your identity, such as using a firewall on your computer and not responding to phishing emails or other scams.

Do not file online in a public space, where your information may not be encrypted. And the best defense, Ciaramitaro said, is to file early — whoever gets to the IRS first wins.

Taxpayers can also get a personal identification number from the IRS, to provide an added layer of identification. This number changes each year and isn’t as accessible as a social security number.

“I suggest people believe their information is out there, so limit the damage,” Ciaramitaro said.

Recognize the signs You may be

4 unaware this type of identity theft has happened until you try to file your return and find someone has already done so using your social security number. Or the IRS may send you a letter saying it has identified a suspicious return using your information. You may also be a victim if IRS records indicate you received wages or other income from an employer for whom you did not work. Be alert to possible identity theft if you are informed you owe additional tax, refund offset or have had collection actions taken against you for a year you did not file a return.

5 Take action If you are a victim of identity theft, the Federal Trade Commission recommends you file a complaint at identitytheft.gov and follow the steps there.

If you are a victim of tax-related identity theft, the IRS suggests additional steps: respond immediately to any IRS notice, complete an identity theft affidavit and continue to pay your taxes and file your return.