Tax identity theft occurs when a fraudster gains access to your Social Security Number (SSN) and/or other personal details and uses it to file a fraudulent tax return on your behalf and collect the refund. While the IRS has safeguards in place to detect fraudulent returns, if a fraudster has a enough of your personal details they may be able to file the fraudulent return and worse commit other financial fraud under your names such as opening unauthorized credit cards or loans.
If a fraudster beats you to filing your return, you will get a rejection notice from the IRS when you attempt to file your return for real. The IRS will only accept the first return filed under your Social Security Number. If your legitimate return gets rejected, you will need to notify the IRS that your identity has been compromised via Form 14039.
Form 14039
Form 14039 is the Identity Theft Affidavit. It is used to notify the IRS that you have become victim to or may potentially become victim to identity theft. The IRS will then mark your SSN to identity potential fraudulent activity. While you need to fill out this form if you have already become a victim of tax fraud, it is important to note that you can use this from to alert the IRS ahead of time if you have reason to suspect your personal information has been compromised (e.g. unauthorized new credit cards, notification of breaches, etc.). Once you complete filling out the form you will need to submit it via mail or fax with a copy of your Social Security Card and drivers license or other government issued identification.
5017c Letter
When the IRS detects and stops a potential fraudulent return, they will send out a 5017c letter to you to verify your identity. The letter will ask you to verify your identity online at idverify.irs.gov or via a toll-free number in order to continue processing your return. You will need your personal contact details, SSN or Taxpayer Identity Number, and your prior year tax return and supporting documents as for the verification process. If the detected return is in fact fraudulent you can notify the IRS via the portal or toll-free number as well.
Other Steps to Take for Identity Theft
If your identity has been compromised, you should also file a complaint with your local police department and with the Federal Trade Commission at identitytheft.gov.
You should also contact the major credit reporting agencies to place a “fraud alert” on your credit records:
- Equifax, www.Equifax.com, 1-800-766-0008
- Experian, www.Experian.com, 1-888-397-3742
- TransUnion, www.TransUnion.com, 1-800-680-7289
A fraud alert will notify potential lenders and creditors that your personal details have been compromised and any new applications may be fraudulent. The alert will remain active on your credit report for 90 days.
Additionally, you should contact all your financial institutions and verify there are no unauthorized charges or accounts opened under your name. You should also consider signing up for a credit monitoring service that will monitor your credit history and alert you on any new or suspicious activity.
Prevention Tips
In today’s world, you will need to always stay alert aware to identify any potential scams or fraudsters. Never give out any personal details or information via e-mail or telelphone. The IRS will never contact your via e-mail or telephone directly, you will always get a mailed letter with instructions. Report any calls of someone stating they are from the IRS to your local police department and to the IRS at 1-800-366-4484. Forward any e-mails purporting to be from the IRS to phishing@irs.gov.
Additionally, follow common sense rules online and when you using your computer or smart phone:
- Use strong passwords that are complex and not easy to guess
- Don’t download any attachments or click on any links in emails from unknown or suspicious senders
- Learn to recognize and avoid phishing e-mails and phishing sites that are posing as legitimate sites.
- Use anti-virus software and firewalls to protection your computer and network from viruses and hackers.