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Identity Theft and the IRS.

Identity theft has become the BIG FEAR of many American's as horror stories of accounts drained, exploding credit card bills, arrests for fruadulant checks, and lives ruined as opportunities and reputations are lost.

Add to this a bold new crime of Refund Fraud. Identity thieves file a federal return claiming a substantial refund using a stolen social security number and other relevant information and fabricated tax information. Google searches for identity theft and tax returns returns 1 million plus articles about this crime. Those few convicted of this crime have collected millions, some hundreds of millions in refunds.

In the Select Committe on Aging, United States Senate on April 10, 2013; Chairman Bill Nelson stated in his opening comments the following facts:

  • The U.S. Treasury is loosing $5 Billion each year to refund fraud, and the number is growing.
  • The IRS reported that from 2010 to 2011 Identity Theft incendents nearly tripled.
  • The Federal Trade Commission reported Tax Related Fraud is growing at an 'astronomical' rate. While credit card related identity theft is declining.
  • The IRS reports a backlog of cases exceeding 300,000 taking  an average of180 days to resolve.
  • Taxpayers victimized in one year are victimized in the following year
  • Many victimes of Refund Fraud

The IRS claims that only 1% of taxpayers are victims of identity theft. For those who are the victims of identity theft the IRS will issue a Identity Protection Personal Identifer Number (IPPIN) for use in filing returns. It has yet to be determined if such PINs detere identity theft and many victims continue to wait for the IPPIN to be issued by the IRS.

According to TIME Magazine in a March 26 article stated the IRS has 3,000 employees devoted full time to resolving 650,000 cases of identity theft. A TaxPro Today article referred to the Treasury Inspector General for Tax Administration report where these numbers were first issued.

The IRS is facing an uphill task in combating this crime. The theives operate across the nation, quickly change operations to avoid apprehension or detection and are sphisticated and are becoming more sophisticated.

Suggested steps to protect our Identity follow.

  • Protect yourself by filing early.
  • Don’t carry your Social Security card or any documents with your SSN or Individual Taxpayer Identification Number (ITIN) on it.
  • Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
  • Protect your financial information. Shred any document with a social security number, bank or credit card account number or other personal information.
  • Check your credit report every 12 months.
  • Secure personal information in your home. Put the documents with the information in a strongbox, safe, or other secure place.
  • Protect your personal computers by using firewall, anti-spam/virus software, update security patches and change passwords for Internet accounts. Keep your antivirus and malware protection software up to date. Identity monitoring company LifeLock says that if you use online tax preparation software, make sure the URL starts with “https” as opposed to just “http.” (The “s” indicates a secure connection.)
  • The IRS never contacts taxpayers via email or social networks. Delete suspisious emails.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.
  • Order a tax return transcript from the IRS  and compire it to your own records of income andexpenses and filing history.
  • Collect your mail daily and read it. If you get a notice from the IRS about a tax return you never filed, or regarding income you never earned, you should get in touch with them.

To this I add a sole proprietorship who must provide a social security number for IRS information forms to contact the IRS for a Tax Payer Identification Number (TPIN) to use in place of your social security number. This number will appear on Forms 1099-MISC provided by businesses you provide services to. Doing so will reduce the number of people who have access to your social security number.

The most often stressed advise was to file your return early.

If you suspect that you are the victim of identity theft file FORM 14039 with the IRS. This will notify the agency of the theft. There will be more steps you will need to take to reclaim your life from the theives that stole it.