Combating Tax Identity Theft: The IRS and the Taxpayer

Taxes Due Reminder

*Originally posted March 13, 2017. Updated February 28, 2020.*

Tax season, fraud, theft – oh my! 

Tax season is a notoriously stressful time. Between filling out the forms, paying taxes or waiting for refunds, the tax-filing process can seem endless.

What’s more concerning is that tax season is a holiday for identity thieves. Tax fraud and tax identity theft continue to be a significant problem for both the tax administration and American taxpayers alike. Whether it’s through data breaches, phishing emails, scams or simple social engineering tactics, criminals hope to obtain enough of your sensitive information so that they can fraudulently file your taxes before you do.

The Internal Revenue Service (IRS) has made great strides to improve its fraud and identity theft detection methods. In 2019, the IRS confirmed and prevented the issuance of 13,737 tax identity theft returns totaling approximately $184.2 million. But fraudsters continue to find ways around these protocols, warranting increased vigilance on both the tax industry and the individual taxpayer. In short, criminals want your tax returns just as much as you do – and they’ll do anything they can to get them.

Signs You May Be a Victim of Tax Identity Theft

  • You received a denial notification when filing your taxes electronically because your Social Security Number has already been used to file a return.

  • Your tax refund arrives before you file, is significantly sooner than expected, or does not arrive at all.

  • You receive a tax return that is much higher than you anticipated.

  • You discover you owe the IRS more money than you thought and can’t find an explanation for the discrepancy in your income or deductions.

Tax Identity Theft and the IRS

According to the IRS, tax identity theft is when someone uses your stolen Social Security number and/or Taxpayer Identification number to claim a fraudulent tax refund. Thieves particularly target individuals that wait to file their taxes. This way, criminals can receive refunds first and remain undetected for longer. If not caught early, this type of identity theft can be difficult to detect and even harder to resolve.

The Protecting Americans from Tax Hikes (PATH) Act was enacted in December 2015 to aid in tax fraud and identity theft prevention efforts. Because of this law, the IRS now has more time to report errors and address potentially fraudulent tax returns, while also issuing refunds more efficiently.

Additionally, the IRS has continued improving its “detection and prevention efforts” by implementing the Return Review Program (RRP) in January 2016. The RRP’s initiatives focus on improving the IRS’s ability to prevent, detect and address fraudulent tax returns.

How does tax identity theft happen?

Data Breaches

Misuse of information can occur in many ways, but the results remain the same. In general, identity theft begins when compromised information is misused.

Data breaches occur when a company’s security measures are breached, resulting in unauthorized access to its sensitive files. Criminals utilize data breaches to access large pools of data so that they can commit identity crimes. In the case of tax identity theft, criminals can use exposed information such as your name, Social Security number and birth date to file taxes under your name.

According to the 2019 End-of-Year Data Breach Report by the Identity Theft Resource Center (ITRC), there were 1,473 data breaches last year, exposing over 164,683,455 pieces of Personally Identifiable Information (PII).

Phishing Scams and Social Engineering

Sometimes, data breaches are only the beginning. If the information exposed through a data breach was not enough to commit fraud or identity theft, fraudsters may continue to target you for more valuable information. For example, if you’ve been a victim of a data breach that exposed your email address or phone number, fraudsters may send phishing emails or scam calls to convince you to divulge your Social Security number, birth date or bank account information.

Tips to Protect Against Tax Identity Theft

  1. File your taxes early. Beat criminals to the punch by filing your taxes as soon as possible. Fraudsters are hoping that they can file them first so that they remain undetected.
  2. Protect your sensitive information. Safeguard your personal information, especially your Social Security number and Taxpayer Identification number, so criminals can’t use that information to file tax returns under your name.
  3. Don’t fall for IRS scams. The IRS will never call or email you to request immediate payment. If communications seem threatening, report them to TIGTA at 1-800-366-4484.
  4. Request an Identity Protection PIN. If you believe you are a victim of identity theft and have filed a report with the IRS, you may be eligible for an IP PIN, which will prevent criminals from filing taxes on your behalf. Residents in several states, such as Florida, California, and Maryland, can also request an IP PIN even if not a confirmed identity theft victim.

If you think you’re a victim of tax identity theft, click here for more information.

Continue following Fighting Identity Crimes for the latest breach and scam updates, ID protection news and tips from our industry experts.

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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.

John is General Counsel and Chief Privacy Officer of Sontiq, the parent company of the EZShield and IdentityForce brands. He is a Certified Compliance...
Read more about John Burcham.

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