The Federal Trade Commission received 1.1 million identity theft reports through its IdentityTheft.gov website in 2024 (the last year for which statistics are available). And though the IRS has reduced tax-related identity theft in recent years, it remains a real risk. Chances are, you or someone you know has suffered an identity theft incident. Here’s what you can do to fight back.
Agencies and Companies Step Up
In recent years, tax-related identity theft has declined because of IRS technology upgrades and other antifraud efforts. In fact, the Treasury Inspector General for Tax Administration reports that the IRS has recently successfully stopped refunds before they were paid on nearly 99% of fraudulent returns.
Financial institutions and online tax preparers have also beefed up security. For example, most of these services use multifactor authentication — such as a password plus a code sent by text — to verify a user’s identity. What’s more, the three major credit bureaus (Equifax, Experian and TransUnion) and many banks now allow consumers to place security freezes on their accounts so that no information can be released or new credit issued.
Little Information, Big Trouble
Despite these efforts, many Americans are regularly defrauded because crooks can create a lot of trouble with only a little personal information. Perpetrators may be able to open credit cards in your name, apply for loans, and even take over financial accounts with just your name and Social Security number (SSN). Even a driver’s license number can open doors to thieves, particularly if they use “synthetic” methods and combine data.
Tax-identity theft is particularly dangerous. Fraud perpetrators may file a fraudulent tax return with your SSN and claim a refund. Then, when you attempt to file, the IRS or state tax authority will likely reject your return as a duplicate. It can take months to resolve the matter and receive any refund you’re owed.
Prevention Tips
According to the ID Theft Resource Center, personally identifiable information used to perpetuate identity theft is generally obtained through one of three methods:
1. A scam (such as a phone-based imposter scheme or phishing email),
2. Stolen cards or documents, or
3. Unauthorized access to a computer or mobile device.
Given such threats, you should never divulge personal information to an unsolicited phone caller if you can’t independently verify their identity. Know that the IRS, law enforcement or other government agencies will never ask for an SSN or financial information over the phone. And no legitimate business or agency will ask you to pay them with gift cards. (Only fraud perpetrators do that!) Also beware of phishing emails and never click on links or attachments in emails unless you’re positive they’re legitimate.
Another key to preventing identity theft is to safeguard your SSN. Don’t carry your Social Security card with you, and don’t provide your number to others unless absolutely necessary. Also, never type it into an email or unencrypted web form.
You can protect tech devices by using strong, regularly changed passwords and keeping security software and patches up to date. In addition, exercise caution when using public wi-fi networks. And routinely review credit card, bank and brokerage statements, as well as your credit bureau reports, for suspicious activity.
To head off tax identity theft, file your return as early as possible so that thieves don’t get the chance to file before you. And obtain an Identity Protection PIN from the IRS. Once registered, you’ll annually receive a six-digit number to use to prove your identity when filing.
Take Control
Even the most careful individuals can fall prey to fraud. So if you suspect something, don’t hesitate to act. Contact your financial institutions, close any compromised or fraudulently opened accounts, and call all three credit bureaus. Finally, let us know how we can help.
CRN202907-11726944