“Identity
Thief” is a 2013 movie starring Jason Bateman and Melissa McCarthy about a
woman who steals the identity of a man named “Sandy.” After the McCarthy character steals the
Bateman character’s identity, all types of high-jinx ensue.
In
real life, identity fraud is a very serious matter that frequently ruins the
credit of the victim and takes a great deal of time and effort to resolve. With the 2013 tax filing season starting on
January 31, 2014, the season for tax identity fraud is also upon us.
Stolen
identity refund fraud (SIRF) is a
subset of identity theft that involves the criminal stealing the tax “identity”
of an individual. Similar to any
identity fraud, a criminal committing tax identity fraud obtains key
information about the victim. In the tax
context, the key is obtaining the individual’s name matched with his or her
social security number. Once that is
obtained, the SIRF thief submits a false tax return in the name of the victim
claiming a tax refund. Unfortunately, in
many instances the refunds are issued.
The
fraud may be discovered when the unsuspecting victim files his or her own
return and discovers that the IRS will not issue a refund because a return has
already been filed under their social security number. It can be very difficult for the individual
to get this straightened out with the IRS once the tax identity theft has been
committed. Like other identity theft,
tax identity theft frequently causes the victim a number of problems including
damaging credit ratings, and reducing state or federal benefits.
The
victims of tax identity fraud are frequently the elderly, or individuals
collecting subsistence payments who are not required to file federal income tax
returns. For the elderly and those who
are not required to file tax returns, it may take much longer for such
individuals to discover that they were victims of tax identity fraud. Nevertheless, the fraud may impact those
individuals by reducing state or federal benefits.
In
September 2013, Treasury Inspector General for Tax Administration (TIGTA)
issued a report on the IRS’s efforts to combat tax identity theft. While TIGTA found that the IRS has taken a
number of positive steps to combat SIRF and that the IRS’s expanded efforts in
identifying tax identify theft cases have been working, TIGTA also noted that
the IRS still issues billions of dollars in fraudulent refunds to tax identity
thieves.
The
IRS and Justice Department have clearly made combating tax identity fraud a
high priority. On September 27, 2013
Kathy Keneally, Assistant U.S. Attorney for Taxes stated that the Justice
Department along with the IRS has made a commitment to crack down on stolen
identity refund fraud, and to prosecute the perpetrators of tax identity fraud
to the full extent of the law.[1]
There
have been a number of tax identity theft prosecutions in 2013, and the
convictions have been highly publicized.
The Justice Department hopes that the prosecution and imprisonment of
tax identity thieves will create a significant deterrent to others
contemplating tax identity theft.[2]
The
IRS has also been active in fighting identity fraud. The IRS has a section on its website
www.irs.gov devoted to preventing identity fraud. The IRS also has 3,000 fulltime employees
working on identity fraud cases in 2013, nearly double the number that it
employed in prior years. In addition,
the IRS has trained more than 35,000 of its employees to help taxpayers deal
with identity fraud.
The
Service has also instituted a special taxpayer identification number, the
Identity Protection Personal Identification Number or IP PIN, that is assigned
to an individual to show that they are the person entitled to file a federal
tax return.
The
IRS Criminal Investigation Division investigates reported identity thefts, and
the IRS is working closely with the Justice Department to expedite the
investigation and prosecution of identity fraud.
Individuals
who suspect that they have been victimized by tax identity fraud can file an
“IRS Identity Theft Affidavit”, Form 14039, to report the suspected identity
theft. The IRS will institute an
investigation of the alleged identity fraud and will work with the taxpayer to
resolve the matter and straighten out the individual’s federal income tax
accounts. The IRS website estimates
that it may take up to 180 days to resolve a tax identity fraud case, but
taxpayers experiencing the process tell of delays exceeding a year. The IRS is working to reduce that time.
A
criminal
who obtains an individual’s name and social security number may attempt to
commit other financial crimes in addition to tax refund fraud so the problem
may go beyond the issue with the IRS.
For example. the criminal may attempt to use the information to obtain
credit cards or loans using the victim’s identity. This additional identity fraud can destroy a
victim’s credit preventing the victim from obtain mortgages or any type of
consumer credit.
The
following are some helpful hints to help minimize the risk of being victimized
by identity fraud (some of which were taken from the IRS website): (1) shred
any documents with your social security number or other sensitive information,
including copies of bills, older bank statements, and older tax return
information such as copies of old tax returns and Forms W-2, (2) avoid giving
out personal identification information over the phone and via the internet
when possible; only give out such information when it is absolutely necessary,
and only on secure websites, (3) don’t carry social security cards on your
person, for example in a wallet or purse, as those items might be stolen, (4)
secure social security cards, tax records, and other personal information in
locked file cabinets within your home, (5) protect your computers against
hacking and unauthorized access by using firewalls, and security software, and
change your passwords for internet accounts periodically, and (6) monitor your
credit reports for any unusual activity and contact the credit reporting
agencies if you see any suspicious activity.[3]
By
taking these precautionary measures, individuals may reduce the risk they will
be victimized by tax or other identity theft.
It is better to invest some time to be vigilant in preventing identity
theft than to have to deal with the significant issues that result from being
the victim of identity theft. However,
if you are the victim of tax identity theft, contact the IRS and fill out the
IRS Form 14039 as soon as possible to expedite the process of clearing your tax
accounts.
Here’s
wishing you a successful tax filing season without any mischief in your tax
filings or any other form of identity theft.
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