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Tax ID Theft

As with many unpleasant things, we often put off doing our taxes until the last minute. But as much as you don’t want to face those 1040 forms, there’s one very good reason to file well before April 15: It’s your best defense against tax-related identity theft.

Tax ID scams usually work like this: Someone who has obtained personal information such as your Social Security number and date of birth files a tax return in your name. They do so as early as possible, because the scam relies on the phony return getting to the Internal Revenue Service (IRS) ahead of the real one. By the time you file, the fraudster may have already gotten a refund, and you won’t know you’ve been victimized until you get word from the IRS (electronically or by mail, depending on how you filed) that it already has received “your” return.

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Your tax data can be stolen in a number of ways: theft of mail or tax returns, corrupt tax-preparation servicesphishing emails from impostors or hacks of tax firms and employers’ personnel records. Some criminals file in the name of deceased taxpayers, or steal children’s identities to claim them as dependents. Another twist: They might use your tax ID to get work, leaving you to deal with the IRS when his or her earnings aren’t declared on your return.

And fraud perpetrators are developing new ways to use your tax info to enrich themselves. For example, they may file a fake return, have the refund deposited in your bank account, then contact you, posing as IRS agents or IRS-hired debt collectors, to reclaim the erroneous payment. As with identity theft scams generally, it pays to be proactive in safeguarding personal data.

Warning Signs

  • A notice from the IRS that more than one return was filed using your Social Security number.
  • A warning from the IRS that you didn’t declare all of your income, based on wages from an employer or job you do not recognize.
  • You get an IRS notice that an online account has been created in your name, and you didn’t create it.
  • You’ve been assigned an Employee Identification Number (EIN) that you didn’t ask for.

How to protect yourself from this scam

  • File your return as early in the tax season as possible.
  • After you file, check the IRS’ Refunds page for the status of your refund.
  • Get to know your tax preparer. Ask about data security and what they do to protect your information.
  • Get an Identity Protection PIN from from the IRS. This six-digit code can block someone who has obtained your Social Security number from filing a phony tax return in your name by giving the IRS a second way to verify your identity.
  • Keep personal and financial documents secure, and shred them when you no longer need them.
  • Take steps to protect your identity online, such as:
  • Use security software and keep it updated.
  • Use different passwords for online accounts and change them regularly.
  • Learn to recognize phishing and impostor emails.
  • Don’t give out personal information such as your address, date of birth and Social Security number unless you know who’s asking for it and why.
  • Never click links or open attachments in an email unless you are certain of who sent it and why.
  • Don’t routinely carry your Social Security card or that of a family member. Ditto for documents containing Social Security numbers.
  • Don’t enter personal or financial information on a website unless you know it is secure. Look for https:// in the URL address or a padlock icon in the browser window before entering personal or financial information.
  • Don’t do anything while using a public Wi-Fi network that involves password-protected accounts or personal or financial data.
  • If you discover or suspect your tax ID has been compromised, fill out an IRS Identity Theft Affidavit (Form 14039). Be patient. The IRS says that resolving ID theft typically takes 120 days. Unfortunately, the COVID-19 pandemic created an enormous backup in processing cases.
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More Resources

  • If you’re victimized by tax ID fraud, call the IRS Identity Protection Specialized Unit at 800-908-4490 and notify your state tax agency. You can also file a report, and get started on a recovery plan, at the Federal Trade Commission's site.
  • The IRS’ Identity Theft Central page has numerous resources for individuals, businesses and tax professionals on preventing and dealing with fallout from tax identity theft, including a guide for taxpayers and detailed information on assistance for victims.

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