Combating Tax Identity Theft: The IRS and the Taxpayer

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. Last year, the IRS caught 787,000 confirmed tax identity theft returns from entering its systems. 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

• Multiple tax returns attributed to a single Social Security/Tax ID number.

• Financial issues (fines, charges, collections) for returns you never filed.

• Inaccurate tax records.

Contact the Federal Trade Commission (FTC) at if you think you’ve become a victim of tax-related identity theft. 
Source: IRS

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. A survey conducted by Soasta found that 31 percent of American taxpayers were worried about the risk of personal information exposure when using tax websites. However, 21 percent of taxpayers still said that they planned to wait until the deadline (April 18) to file their taxes.

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 is still a work in progress, but its initiatives focus on improving the IRS’s ability to prevent, detect and address fraudulent tax returns.

Protecting Americans from Tax Hikes (PATH) Act

Section 201
Enacted: Dec. 18, 2015
Purpose: Safeguard against tax fraud/tax identity theft 

• Employers must file W-2 forms to the Social Security Administration by Jan. 31.
• The IRS must withhold refunds of taxpayers who claim the Earned Income and/or Additional Child tax credits until Feb. 15.

Source: Thomson Reuters

How does tax identity theft happen?

Data Breaches

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

According to the Identity Theft Resource Center (ITRC), there have been 279 data breaches so far in 2017 (last recorded March 7, 2017), and a total of 1,093 breaches in 2016. 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.


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.


What should you do?

Use these tips to help you avoid falling victim to tax identity theft:

  • 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.
  • Protect your sensitive information. Safeguard your personal information, especially your Social Security number and/or Taxpayer Identification number, so that criminals can’t use that information to file tax returns under your name.
  • Don’t fall for IRS scams. You will receive a bill in the mail before the IRS will ever contact you via phone. 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.

For more tips from the IRS, click here.

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

Keep following Fighting Identity Crimes to stay up-to-date on the latest breach and scam news, as well as tips on how to continue protecting your personal information.

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 Corporate 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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