How to Combat Tax Identity Fraud

File your tax return early, guard your SSN and stick to snail mail.

(Image credit: Getty Images/iStockphoto)

The Problem

A scammer files a tax return in your name and intercepts your refund.

Scare Factor

(Image credit: Thinkstock)

Tax ID fraud is remarkably easy if a crook has your Social Security number. Although the IRS verifies wage information submitted on a tax return with the Form W-2 that your employer files with the Social Security Administration, it doesn't begin the process until the July following tax-filing season. In the meantime, a crook can falsify income information on a return and make off with a refund. Other scams involving the IRS include phishing, in which fraudsters send e-mails that appear to be from the IRS asking for money or personal information. Or someone may call posing as an IRS agent, threatening arrest or other actions.

How to Combat: Stolen Social Security Number | Medical ID Theft | Lost/Stolen Electronics | Hacked Credit/Debit Account

How to Avoid it

If you try to file your tax return and the IRS notifies you that it has already received a return with your Social Security number, someone has most likely used your information to get a refund. Or you may receive a letter from the IRS questioning income amounts or other factors on a fraudulently filed tax return. File your return as early as possible. The IRS initiates communication with taxpayers through snail mail, so don’t reply to unsolicited e-mails that appear to be from the IRS or click on links or attachments (forward such suspect e-mails to (opens in new tab)). If you receive a suspicious phone call, hang up, then call 800-366-4484 to report it.

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What to Do If You’re a Victim:

If the IRS notifies you that someone has filed a return in your name, respond right away. Mail Form 14039, the Identity Theft Affidavit, to the IRS with proof of your identity, such as a copy of your Social Security card or driver’s license. You may have to mail a paper copy of your tax return, too. Once the IRS settles your case, you should get a refund if you’re owed one.

To thwart further fraud, the agency may invite you to use a six-digit Identity Protection Personal Identification Number (IP PIN) when you file electronic or paper returns in the future. Because your Social Security number is in the wrong hands, you should also take steps to protect against other forms of identity theft.

The most frustrating part may be the long wait. The IRS says the typical identity theft case takes about 120 days to resolve. But the Taxpayer Advocate Service, an independent watchdog within the IRS, points out that the estimated time frame accounts only for how long one segment of the IRS works on the case and doesn’t necessarily reflect the time taken “from the perspective of the taxpayer.”

How to Combat: Stolen Social Security Number | Medical ID Theft | Lost/Stolen Electronics | Hacked Credit/Debit Account

Lisa Gerstner
Contributing Editor, Kiplinger's Personal Finance

Lisa has spent more than15 years with Kiplinger’s Personal Finance and heads up the magazine’s annual rankings of the best banks, best rewards credit cards, and financial-services firms with the best customer service. She reports on a variety of other topics, too, from retirement to health care to money concerns for millennials. She has shared her expertise as a guest on the Today Show, CNN, Fox, NPR, Cheddar and many other media outlets around the nation. Lisa graduated from Ball State University and received the school’s “Graduate of the Last Decade” award in 2014. A military spouse, she has moved around the U.S. and currently lives in the Philadelphia area with her husband and two sons.