Stolen Identity Tax Refund Fraud

Stolen Identity Tax Refund Fraud 

By: Adam Freeman

Edited: 12/03/2023

Overview

According to the Interim Results of the 2023 Filing Season by the U.S. Treasury Inspector General for Tax Administration, as of February 25, 2023, the Internal Revenue Service (IRS) had identified 31,079 fraudulent tax refund returns claiming a total amount of $310,724,203. To put this data into perspective, it is important to understand that these numbers are representative of roughly the first month of tax season only. These schemes are generally referred to as Tax Refund Fraud or Stolen Identity Refund Fraud (SIRF). According to the IRS, these frauds occur, “when someone uses your stolen personal information, including your Social Security number, to file a tax return claiming a fraudulent refund.”

Often, these are elaborate schemes perpetrated by large criminal enterprises with individuals participating in different stages of the scheme. First, the fraudsters must obtain Social Security Numbers and other personal identifying information needed to file a return. Then, they use this information to file false returns (usually electronically) with the IRS. After filing, there are multiple methods used by the fraudsters to obtain the refunds. The most common ways of doing this are having, “the refunds electronically transferred to debit cards” or having them, “delivered to addresses where they can steal the refund out of the mail,” (U.S. Department of Justice). An example of a Tax Refund Fraud scheme can be found in a press release by the U.S. Department of Justice, posted on March 13, 2023.

Signs Indicating That You May Be a Victim

The IRS warns that you should “be alert to possible tax-related identity theft if” any of the following are applicable to you:

-You received a letter from the IRS in relation to a tax return that you did not file.

-You can’t file a tax return electronically because of a duplicate Social Security number.

-You received a tax transcript in the mail that you did not request.

-You received a notice from the IRS that an online account has been created in your name.

-You received a notice from the IRS that your existing online account has been accessed or disabled when you took no action.

-You received an IRS notice that you owe additional tax or refund offset, or that you have had collection actions taken against you for a year that you did not file a tax return.

-IRS records show that you have received wages or other income from an employer that you did not work for.

-You have been assigned an Employer Identification Number, but you did not request one.

Another sign, noted by the United States Postal Inspection Service, is receiving a 1099 for unemployment when you didn’t claim the benefit. If you have experienced any of these signs, you should take action to combat the incident (discussed below).

Protecting Your Personal Data and Identity

To protect yourself better against identity theft and Tax Refund Fraud, there are several things you can do. Many preventative measures relate to electronic devices and safely using the internet. On your computer and mobile phone, you should use security software. The most important software to have been one that provides virus/malware protection and a firewall. This software helps to secure your device by protecting against cyberattacks (“attempts to steal, expose, alter, disable, or destroy another’s assets through unauthorized access to computer systems”).

In addition, you should create strong, unique passwords that will not be easy to guess. For each account that you have, you should have a different password. Your usernames and passwords should be kept in a safe place, where only you can access them.

When on the internet, you should only give personal and financial information on encrypted websites. Websites that are encrypted will have, “https” at the beginning of the web address. You should use caution when accessing websites and avoid sites that appear to be unprofessional – this is a sign they are counterfeit websites trying to steal your information.

You should avoid phishing emails or messages. Phishing can be described as the fraudulent practice of sending emails or other messages posing to be from a reputable company to get someone to reveal personal information. According to the Federal Trade Commission, they, “often tell a story to trick you into clicking on a link or opening an attachment.” At first glance, the message may appear to be legitimate, but there are usually signs indicating that it isn’t. Common signs that a message is a phishing scam include the following:

-The message has a generic greeting.

-The message says your account is on hold or locked because of a billing issue.

-The message invites you to click on a link to update your payment information.

-The message contains spelling, grammar, or punctuation errors.

-The message creates a sense of urgency.

-The message is from a suspicious address.

-It seems “too good to be true.”

If you get a message like this, don’t click the link! Instead, use the trusted website or telephone number you know already (for example, on the back of your credit card, or on your bank statement).

Another good practice is using multi-factor authentication wherever it is offered. The IRS says that “generally, a multi-factor authentication option allows the user to receive a security code, for example, as a text to a mobile phone.” This means that to login, you must enter your username, password, and security code. If you file your own taxes using an online provider, you will have this as an option. The IRS also has identity protection personal identification numbers (PINs) that offer additional protection for your Social Security number on your tax return. To learn about the PINs offered by the IRS and how you can get one, visit their website here.

When dealing with physical documents containing your personal identifying information, you should store them in a safe place. The best practice is to treat these documents as if they were cash. Before throwing away documents containing this type of information, you should shred them, or dispose of them in a trustworthy way – putting them in trash or recycling could lead to someone taking them! Many communities offer free shred days where you can bring your confidential documents to be shredded for free. Many businesses also offer shredding as a service, where you can pay to have them shredded.

Taking Action After Becoming a Victim

If your personal identifying information is compromised and you know or suspect you are a victim of Tax Refund Fraud, there are several recommended actions that you should take depending on your situation.

For any Tax Refund Fraud scenario, you should “respond immediately to any IRS notice: Call the number Provided” on the IRS notice you receive in the mail (IRS.gov). NOTE: the IRS does not make contact through text message! The IRS also does not make telephone calls threatening to arrest you or prosecute you. If you receive such a call or text, do not respond or provide information, as the caller is likely a fraudster. The IRS also recommends visiting IdentityTheft.gov “for steps that you should take right away to protect yourself and your financial accounts.”

If your electronically filed return is rejected due to a duplicate filing under your Social Security number, or the IRS instructs you to do so, complete Tax Form 14039, Identity Theft Affidavit. After completing this form, attach it to the back of your completed paper tax return and mail it to the IRS location based on the state in which you reside. There is also an option to submit Form 14039 online and to mail your paper return separately.

If someone has filed a fraudulent return in your name, you can get a copy of the return. The IRS has specific instructions for requesting a copy of fraudulent returns which can be found here.

If you electronically file your tax return and you receive a message telling you that a dependent that you claimed on your return has been claimed on another tax return or on their own tax return, or if you receive an IRS Notice CP87A, you should follow the steps provided by the IRS on “What to Do When Someone Fraudulently Claims Your Dependent.”

The IRS has many resources that can be found on their website (IRS.gov). If you have previously contacted the IRS, but your issue has not yet been resolved, you should contact the IRS for specialized assistance at 800-908-4490.

Things the IRS Never Does!

The IRS will never initiate contact with a taxpayer by email, text, or social media to request personal or financial information. Furthermore, the IRS will never call taxpayers with threats of lawsuits or arrests, or requests for taxpayers’ Identity Protection PINs. If you receive a communication like this, it is someone posing as an IRS employee, and you should not talk to them.

#finances #security #irs #bankaccount #taxes #fraud #fraudprevention