Theft of personal information, such as social security numbers, to commit fraud on tax returns, to claim refunds or credits to which a taxpayer is not entitled to or commit other financial crimes is on the rise. Using this information, thieves often file fraudulent returns early during the filing season to avoid information matching. So you should have a pretty good indication that you are a victim of identity theft if you receive a notice from the IRS stating that more than one tax return has been filed using your information or wages are shown from an employer that you have not worked for. For the 2011 tax filing season, it has been estimated that identity theft related fraud was involved in the filing of 1.5 million tax returns representing $5.2 million. If you are a target, it can take months to clear your name, during which time a legitimate refund you should have received is withheld.
Typical methods used to gain access to your personal information include email or telephone phishing or dumpster diving. Some taxpayers receive phony IRS emails telling them they have a refund pending or are under investigation. The IRS does not send unsolicited tax-account related emails requesting personal and financial information. If you receive a suspicious email from the IRS report it by calling the IRS at 800-829-1040 or forwarding the email to phishing@IRS.gov.
The following are some of the preventative techniques one can employ to avoid identity theft:
• Arrange for masked social security numbers (SSN) where possible, e.g. on insurance cards.
• Store your social security card in a safe and secure location and do not discard any documents with your SSN on them. Use a shredder before discarding documents.
• Resist giving your SSN or other personal information to businesses just because they ask for it.
• Protect your computer by using firewalls and anti-spam or anti-virus software. Regularly change passwords for internet accounts with sensitive information.
Remember – an ounce of prevention is worth a pound of cure.