Refund fraud. The thief files a fraudulent tax return, reporting fictitious wages and withholdings, usually early in the year before companies are required to issue 1099s and W-2s. The thief pockets the refund, which is typically issued electronically or with a debit card to avoid the hassle and suspicion of depositing a paper refund check at the bank. When the real taxpayer files a legitimate tax return later in the tax season, the IRS rejects the duplicate filing under his or her Social Security number.
Employment-related fraud. The thief gets a job using stolen personal data and collects earnings without withholding all requisite income taxes. When the company files a 1099 or W-2 under the stolen Social Security number, the taxpayer gets a bill for unreported earnings tied to his or her Social Security number.
Take these steps to help prevent your personal information from getting into the wrong hands:
- Don’t carry your Social Security card or documents with your Social Security number.
- Don’t give out your Social Security number to businesses or medical providers just because they ask for it. Give it only when required.
- Protect your financial information. Shred documents with personal identifying information. Don’t provide information in response to e-mail or text messages. Don’t give personal information over the phone unless you have initiated the contact or you are sure you know who you are dealing with. Secure personal information in your home.
- Check your credit report every 12 months.
- Protect personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.
- File as early as possible in the tax filing season.
- Respond immediately if you receive a notice from the IRS. If you believe someone may have used your Social Security number fraudulently, notify the IRS by responding to the name and number printed on the notice or letter. You need to fill out IRS Form 14039, Identity Theft Affidavit.
- If you’re a victim, get an Identification Number from the IRS that proves you are the legitimate filer of future tax returns. The IRS uses these numbers (called IP PINs) to select ID theft victims whose identities have been validated by the IRS. It allows legitimate returns to be processed and prevents processing of fraudulent returns, thereby, mitigating delays in victims’ federal tax return processing. Generally, the number is mailed out once the taxpayer’s account has been resolved.
- Watch what you put on social media sites. Some people put personal information on the Internet, such as their birthdays, addresses, phone numbers, marital status, etc. Thieves can use the information so be careful what you disclose. Change social media accounts to “friends only” or similar settings to prevent information from being accessed by outsiders.