Case Study: Tax Identity Theft

Someone filed my taxes

By January 31, the due date for W2s and other tax forms to be postmarked, accountant and tax preparer offices were already bustling with extra traffic.

Employees at a tax office just outside Baltimore, MD noted the speed clients exhibited this year in scheduling appointments. Several clients commented that they wanted to get into the tax office as soon as they received all necessary documents for filing. There has also been an audible buzz from clients talking about fraud and identity theft — most expressing concern over filing taxes promptly to avoid someone else using their identity to file their taxes first.

In nearly 25 years in business, the tax office had yet to experience such a rush so early in the tax season. “We’re typically educating people about the risks and dangers of tax fraud, but many clients were already well aware and doing what they could to preempt it. However, we have also been sure to explain that filing first, while very important, does not mean there aren’t other ways to be impacted by tax fraud.”

Illustrating another common cause of tax fraud, here is a cautionary tale from the perspective of a college student.

In the IRS’ 2012 audit, they discovered that 1.1 million fraudulent tax refunds were sent to fraudsters using stolen Social Security numbers. That year alone, the IRS lost $3.6 billion dollars.

Every year, mountains of fraudulent tax returns pour into the IRS from criminals hoping to beat their legitimate counterparts to the finish line. If a scammer submits their paperwork first, they end up with a pretty paycheck and the impersonated taxpayer is left to clean up the mess and recoup their tax refund.

Digging through financial documents, bouncing between IRS representatives and checking every bank account and credit report — the recovery process can feel like an eternity and it’s something no one should have to go through.

Recently, EZShield spoke with a victim of tax identity theft. This is her story.

In 2014, the victim received a Notice of Adjustment from her state of residence informing her of a $20,000 discrepancy between her state and federal income taxes in 2011, a full three years prior.

“When I got the [IRS] letter I was really confused. I just kept thinking that it had to be a mistake — why would they think I owe so much and why would it take them three years to figure out there was a problem?

At the time, I was an eighteen-year-old college student and was still listed as a dependent on my parents’ taxes. My only income was from working part-time at a bakery during summer and winter break. The whole thing made no sense.”

She wasn’t sure where to start to address the issue, so she went to the IRS website. There she was able to sign up for an account and request a copy of her tax return. She then waited anxiously for them to fax her the taxes in question.

“While it sounds like a simple process, it ended up taking up a lot of my time. Their website was not user-friendly and I didn’t have easy access to fax machine. I don’t know how many hours of complete panic were spent at my computer.”

When the tax return arrived, she quickly scanned through the information. There was her name, there was her Social Security number — but those were not her taxes.

“I couldn’t believe it, someone filed my taxes before me. Identity theft wasn’t even on my radar. I thought identity thieves would target the wealthy, not students working part-time.”

The victim’s federal taxes showed that a scammer in Tallahassee, Florida had filed using her personally identifiable information. The address supplied was that of an apartment complex, but there was no apartment number listed. There were taxable deductions made for educational costs, including one for purchasing a new computer.

“The deductions really concerned me. Did they know I was a student? I had purchased a computer the year before — were they aware of this?  Was this a mistake or was someone knowingly using my identity?”

As you can see, being a victim of tax identity theft is like playing a daunting guessing game by yourself. It’s tedious, it’s tiring, and most of all it’s terrifying.

My biggest fear was that [the criminal] would continue using my information. With my name and my social [security number], I figured that they could pretty much do anything they wanted.

Fortunately, when the victim pulled her credit report, no new lines of credit had been opened in her name.

The next day she sent the IRS an Identity Theft Affidavit Form and responded to her home state via certified mail. The letter to the state included a note explaining that she was a victim of tax identity theft and a copy of the affidavit.

She tried to do more, such as contacting the local police department, but she was instructed that it was out of their control and she would need to deal directly with the IRS. It was like she hit a dead-end.

Six months later, seemingly out of the blue, she received a notice from her state saying the issue was resolved. And for the most part, the ordeal was suddenly over.

“It felt really strange. To [the IRS] it was over, but I still had just as many unanswered questions as when this whole thing started.”

 The fraudster could have found physical documents that belonged to the victim, such as those she’d thrown in the trash. Dumpster diving remains a top method for committing fraud.  Or perhaps it was an unscrupulous employee somewhere who had been able to access her information.

The victim realized that “worrying about this and taking the chance of going through it again was not worth the risk. I found out my bank offered EZShield Fraud Protection, so I enrolled in it. I also signed up for an Electronic Filing PIN with the IRS and started making a real effort to keep all of my information secure.”

Knowing that my information was being protected by EZShield helped me finally feel some relief from my situation.

Like this victim of identity theft, there are a number of things you can do proactively to avoid tax identity theft. Of course, one of the best things you can do is file your taxes early.

The IRS gives refunds on a first-come-first-serve basis. If you and a fraudster file under the same Social Security number, though you’ll still have to deal with the fallout, at least you won’t get stuck waiting until the issue is resolved to receive your refund.

Want more information on tax fraud and identity theft? Visit our Resource Center on Fighting Identity Crimes.

The views and opinions expressed in this article are those of EZShield Inc. alone and do not necessarily reflect the opinions of any other person or entity, including specifically any person or entity affiliated with the distribution or display of this content.

Laura, former VP of Marketing at EZShield, now a Sontiq brand, is a marketing professional with over 20 years of experience leading marketing and...
Read more about Laura Bruck.

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