Now that the holiday season is behind us, another exciting season looms ahead – tax season.  Of course for those of you working in the tax preparation industry the term “exciting” may not very likely has a different connotation.  

High profile data breaches this year have created a greater public awareness of the vulnerability of their personal information, but identity theft is not just limited to simple debit or credit card theft.   This crime is broader than just financial identity theft. There are different types of identity theft such as medical, child, criminal and even tax identity theft.  Since 2010, tax identity theft – the theft of personal information to file fraudulent tax returns, has become the form of identity crime with the most accelerated growth rate.  Most victims do not know that a crime has been committed until the IRS informs them that duplicate tax returns have been filed. It is common for the identity thief to use a forged tax return early in the tax season to receive a fraudulent return.

In 2012, over 369,000 identity theft complaints were filed with the FTC’s Consumer Sentinel Network. Approximately 43% of those complaints were identified as being related to tax Identity theft. While there are many steps one can take to mitigate the risk of identity theft, the best prevention tip for this particular type of identity theft is to file your taxes early.  Since 2010, the IRS has allowed tax payers to file their returns entirely through digital mediums.  While this greatly increases convenience, it also makes it possible for someone to file returns without accompanying verifying documentation (such as a social security card or driver’s license).  The IRS presently has no independent verification method for validating returns. 

What this means is that essentially the first return that gets filed under a given social security number is accepted as valid on a de facto basis, and then only flagged for fraud later if/when a duplicate return is filed.  At that point the consumer has to file a paper return with verifying documentation to prove they are who they say they are.  While the IRS will eventually sort out the issue, it can take months, or in some cases even years for victims to be made whole.  During that interim, any return you may have been expecting or even counting on will not be available.  Filing your return before the identity thief has an opportunity to file will go a long way to mitigating your risk to this particular type of identity crime.

Additionally, it is wise for consumers to monitor financial documents, buy a lock for your mailbox, shred all paperwork with sensitive information and routinely check one’s credit history with the three major credit bureaus: Equifax, Transunion and Experian.  Another good detection tool is the annual earnings history report compiled by the Social Security Administration.  This report shows the wage earning history attached to a given social security number. Discrepancies on this report are also great indicators that someone may be planning to file a tax return with your social security number or at the very least is using your social security number.

If consumers have additional questions regarding identity theft they can contact the Identity Theft Resource Center toll free at (888) 400-5530 or visit their website at www.idtheftcenter.org.

"Tis the Season – To File Your Taxes" was written by Matt Davis.  Matt is Director of Business Alliances at the Identity Theft Resource Center. We welcome you to post/reprint the above article, as written, giving credit to the author and linking back to the original posting.

 

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