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7 Steps to Take with the IRS If You Have Been a Victim of Identity Theft

7 Steps to Take with the IRS If You Have Been a Victim of Identity Theft

Identity theft has definitely been on the rise since the advent of the Internet, but the truth is that scammers have always been with us. Individuals can be victimized as a result of hackers attacking a favorite store where they shop or by falling for a phishing scam, but the same thing can happen as a result of a stolen wallet or your mail being taken out of your mailbox. Nobody is invulnerable – we all need to be on the lookout and to know what to do if it happens to us. 

There are a number of steps you need to take if you learn that you have been the victim of identity theft, and one of the most important is to make sure that the Internal Revenue Service and your state tax agency are both aware of your situation.  Though your primary concern may be about your credit cards or bank accounts, tax-related identity theft is a serious problem. Once an identity thief has your Social Security number they can use it to file a fraudulent tax return and obtain a refund that is inappropriate or puts the money that you were counting on into their hands.

There are many people who don’t realize that their identity has been stolen until they file their taxes and receive notice of a duplication from the IRS. Because the federal and state tax authorities are so affected by and involved in the aftermath of identity theft, they have worked hard to find ways to combat it. Their steps have included proactive strategies designed to prevent identity theft from happening and discovering it as soon as it has. They have also developed a number of strategies to help those who have fallen prey to these scammers. Here are 7 steps that you can take to protect against and respond to identity theft.

  1. Be Smart About Your Personal Information – One of the easiest ways for an identity thief to act is to take your Social Security number directly from your wallet or your handbag. Your Social Security card is not something that you should walk around with, and you Social Security number should not be recorded anywhere that it is easily available. Be particularly cautious about anybody asking you for this information, and take steps to safeguard other personal information by installing security software on home computers and using secure passwords that you change on a regular basis.
  2. Educate Yourself About Scams and Be Vigilant About Them – Some scams involve phone calls to your home, with callers insisting that they are with the IRS and that you need to send money. Others may be fraudulent emails indicating that you need to call or click through a link to provide more information or to protect yourself against a security breach. Identity thieves are constantly working to come up with new ways to get your personal information, including sending out letters that look very much like those sent out by the IRS. If you receive an email that is purportedly from your bank, do not click on any links – delete the email immediately. If you are concerned that the correspondence may be legitimate, log on to the bank’s website using the same web address that you normally do rather than clicking on the email’s link, or call the customer service number on your credit card directly. Remember that the IRS will not reach out to you via either phone or email, and be aware that there is a new scam in which a fake CP-2000 notice is being sent out.
  3. Call the IRS Immediately If You Have Been an Identity Theft Victim – Once your identity has been stolen, you need to notify the IRS. This is especially true if you attempt to e-file your tax return and are notified that your taxes have already been filed. The agency is prepared to help in these situations, and will offer you a few options including filing using a paper tax return and completing Form 14039 – the Identity Theft Affidavit. They will also encourage you to contact one of the credit bureaus so that they can take all appropriate steps on your behalf, and notifying the Federal Trade Commission.
  4. Respond to Letters from the IRS Immediately – When the IRS suspects that you have been a victim of identity theft, they will send you a letter in the mail. Though scammers have started to use the U.S. mail to fool taxpayers, if you receive one of these letters it is a good idea to call the agency to confirm that the letter is real or to contact one of the agency’s Taxpayer Assistance Centers for help.
  5. Use the IP PIN that the IRS Provides to You – Once the IRS has confirmed that you have been the victim of identity theft, they take specific action to limit the damage that is done and to provide you with protections for the future. One of the steps that they take is the issuance of a special six-digit identity number called an IP PIN which you will need to use in the future if you choose to file your tax return electronically. You will be issued a new number each tax year after the identity theft has occurred.
  6. Be Responsible and Report Fraudulent Activity – Even if you are not the intended victim of an identity theft, you have a responsibility to report suspected activity to prevent others from being victimized. The IRS provides instructions on its website, irs.gov, on how to report fraudulent activity. You can call 1-800-366-4484 or email [email protected] to report scams, and if you receive a letter from the IRS that you believe is fraudulent, you can report it to the Treasury Inspector General for Tax Administration.
  7. Be Aware That the IRS is Working to Help – Though it is easy to think of the IRS in a negative light, American taxpayers should be aware that the agency is taking strong action to pursue those who are victimizing them. This has meant that over 2,000 identity thieves have been convicted of their crimes in the last couple of years. More than $8.7 billion was protected from 1.4 million attempted identity theft tax returns in 2015 alone.

 Be cautions. When in doubt about the validity of an IRS correspondence, consult with a tax professional.

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Steward Financial

Steward Financial

Jon Osborn is a tax preparer based in San Dimas, California. His company, Steward Financial Services, offers a broad range of tax preparation, accounting and business consulting for small businesses. He loves to work with clients who are looking for answers to complex tax and business planning issues. He has owned several small businesses and worked with over one hundred small business owners. He helps his individual and business tax clients find the best ways to spend their money in order to minimize IRS tax. Small businesses looking to grow, sell or just increase cash flow are one of Jon's specialties.

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