Identity Theft and the IRS

June 23, 2015 | Individuals, Tax Advice |

Have you read some of our recent tweets? Check these out: Tweet 1 Tweet 2 Tweet 3  What do these 3 tweets have in common?

They are all about identity theft issues with personal tax returns! We’ve seen more and more individual tax returns get rejected from the electronic filing system because a tax return has already been filed using their social security number. This not only delays our clients’ refunds, but adds a lot of headache and extra work to resolve the identity theft issue and to ensure that the correct tax return is properly filed.

Why is this happening to over 100,000 taxpayers? Why is tax refund fraud up to $21 BILLION? Why isn’t the IRS doing more to solve the problem and stop future fraud?

In an attempt to become more tech-user friendly, the IRS has increased the amount of services available online. In turn, this allows more avenues for hackers to exploit and steal. In particular the “Get Transcripts Online” feature had a major breach.  From John Koskinen’s presentation before the Senate Finance Committee:

“…The cybercriminals overcame a multistep authentication process that required the taxpayer’s Social Security number, date of birth, tax filing status and home address.”

Another reason for the increase in IRS identity theft, is because the crime is easy to commit! Criminals only need your name, Social Security number, and date of birth.  They can paper file or electronically file a fraudulent return and get a refund with very little chance of getting caught.

The IRS knows there is a problem, but an underfunded department and an outdated fraud detection system results in refund checks being mailed without reviewing red flags.  The refund system is set up to “pay first, ask questions later.” This is not in favor of the victims!

If you are a victim, we will assist you in applying for an IRS Identity Protection Pin. This safeguard will be included on your tax return in addition to your Social Security number.

What can you do to protect yourself against IRS identity theft?

We always recommend electronically filing tax returns, so nothing can get intercepted in the mail.  We also recommend that our clients enroll in an Identity Protection Service, such as Life Lock. These programs alert you when your information is used to get a loan or to open a credit card. Also, please make sure your personal documents are secure!  We utilize a Client Portal to safely and securely transmit and receive client documentation.

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