After taxes are filed, most of us hope we don't hear from the IRS. No one wants a letter advising of an error, a penalty or an audit. But if someone has stolen your identity, it's possible that a letter from the IRS following up on apparent errors in your tax filings could be the first time you learn of it.
Although identity theft is most commonly associated with credit or bank account frauds of various sorts, there are also frauds involving identity theft that impact the victim's reported taxable income and/or refund check.
Tax Discrepancies Might Reflect Someone Working Under Your Name
If an imposter has used your information to get a job, the employer would report income to the IRS under your Social Security number. In turn, you might receive a letter from the IRS asking about earnings you didn't disclose in your tax return, from an employer you don't recognize.
Disclosures from the Social Security Administration might also reveal this kind of fraud if payroll taxes have been paid under your Social Security number. But unlike the IRS, the Social Security Administration has no mechanism to identify discrepancies between your information and theirs or to contact you to clear them up. That's one reason it's important to read your annual SSA disclosure statement carefully, to check that the reported income for each year matches what you actually earned.
However you become aware of them, extra earnings — which might for a moment seem like a stroke of good luck — might actually indicate somebody else working under your stolen identity.
Some Thieves File Early Returns in Order to Steal Tax Refunds
If an identity thief has enough information about you, he may go so far as to file a tax return in your name in order to collect your refund. In this case, the IRS will believe that you have already filed and received any amount due back, and send you a letter stating that two tax returns have been received instead of the check you're looking forward to cashing.
Phishing Scams Use Fake IRS Notices as Bait
On the flip side of the IRS notification coin are fake notices from the IRS stating that more information is needed before your return can be processed or your refund check mailed. These are usually delivered through e-mail, which is a tipoff that they are fraudulent — the IRS, like most banks and credit companies — never uses e-mail to initiate communications with taxpayers.
If you receive a communication pretending to be from the IRS, you are encouraged to report it to the IRS by forwarding the email or at least the email's Internet header to the IRS at firstname.lastname@example.org.
The IRS Has Dedicated Resources for These Problems
You may not have heard of tax ID theft, but it's a big enough problem that the IRS has a dedicated Identity Protection Specialized Unit available to assist citizens experiencing problems with identity theft and their taxes.
If you do receive a letter from the IRS after filing your taxes, it will include contact information that you should use first. But if the problem cannot be resolved through that contact — or if you are a victim of identity theft and have concerns about tax fraud although you haven't received a notice from the IRS — the Identity Protection Specialized Unit is available toll-free at 800-908-4490, Monday-Friday, from 8:00 a.m. to 8:00 p.m.
But Why Wait for an Annual Event to Protect Yourself?
If a letter from the IRS or a Social Security Administration disclosure tips you off to fraudulent use of your information, that's a good thing —but it also reveals a fraud that may have been going on for many months before you became aware of it. And long-running identity frauds can be among the most difficult to resolve.
Use of your stolen identity to gain employment or file tax returns are difficult to detect on your own, but may be associated with recorded address changes or other activity involving your information that can be detected sooner than your next tax filing with the help of an identity protection product, which can help you detect identity theft much earlier than you might on your own and assist you through the fraud resolution process if your information is stolen.