What To Do in the Case of a Fraudulent Return

According to the Wall Street Journal, over 800 million individual records have been stolen through major information breaches in the past three years, e.g. when databases such as Target or Anthem were compromised. With these numbers, every individual in the U.S. could have had their information stolen 2.5 times.

What happens when this information turns into a fraudulent return? Read on for more info!

Tax identity theft occurs when a thief gets a hold of your name, birth date and Social Security number. The thief then uses this information to file a tax return. Erroneous information about an employer, income, dependents etc. are included in the tax return along with the thief’s address or bank account information to generate a refund.

Oftentimes, you are unaware that a fraudulent return has been filed until the IRS rejects your correct return (since one is already on file with your Social Security number) or you receive a letter from the IRS stating:

1. That more than one return was filed
2. You received wages from an employer unknown to you
3. You have a balance due, offset or collection action

The Department of the Treasury estimates it takes 278 days to resolve a case of tax identity theft and it is up to the taxpayer to prove their identity.

STEPS TO TAKE

If you are facing tax identity theft, here are the steps you should take:

1. Share the IRS letter or notice with your tax professional. They can help you respond to it.
2. Complete IRS Form 14039, the Identity Theft Affidavit.
3. File a local police report.
4. File an identity theft report with the Federal Trade Commission.
5. Set up fraud alerts with the credit bureaus (Equifax, Experian, TransUnion)
6. Set up a system for monitoring your credit reports closely for at least the next year.
7. Notify your financial institutions.
8. Submit your tax return by paper if the electronic copy was rejected.

Unfortunately, it can be a lot of work and all the while you will be waiting. If you have received a letter or notice from the IRS, we can help you respond to it. Get in in touch with us today.