Imagine sitting in front of your computer, financial documents in hand and you have just completed your tax return. You’re feeling accomplished and confident, as you click the button to e-file. You don’t get a confirmation number, but a rejection notice. Your stomach is in knots and panic sets in. You check your numbers and information. It’s all correct. You then discover someone else has filed a tax return using your Social Security number, claiming a refund that the IRS has already processed. It is now up to you to prove who you are and your correct income so you can get this mess straightened out.
Unfortunately, situations like this are increasingly common. According to the IRS, the agency processed more than 5 million fraudulent tax returns during the 2013 filing season, claiming nearly $30 billion in refunds. Furthermore, fraudsters do not often go for big returns; they claim an average refund of $3,700. Often retired or elderly individuals, the infirm, those recently deceased, and children are easy targets.
Once the fraud is discovered, you must file a paper return along with Form 14039, Identity Theft Affidavit, accompanied by a copy of your Social Security card and driver’s license or other government-issued identification card. The IRS has an Identity Theft Victim Assistance (IDTVA) organization staffed with employees who have specialized training that will handle your case. The time to resolve your issue can vary from 120 days to six months or longer. While waiting on a resolution from the IRS, you should file an identity theft report with your local police and report the stolen identity to the three major credit reporting agencies, TransUnion, Equifax and Experian. You may also consider putting a freeze on your credit, which restricts access to your credit file, preventing someone other than you from establishing new credit in your name. You may even report the stolen identity to your bank and other financial institutions to prevent the damage from going any further than it already has.
While these actions may seem excessive, the truth is tax identity theft, also known as stolen identity refund fraud, can have reaching effects. For example, we have experience with a client whose child’s Social Security number was used in a fraudulent return. The IRS showed the return used a W-2 indicating an earned $30,000 in wages when in fact the child only earned $2,400 during her summer job. The problems escalated because the child was applying for the Free Application for Federal Student Aid, and the reported income disqualified her for student loans and her scholarship through her school for a full semester.
While the IRS is making strides in detecting the fraud before refunds are issued, the surest safeguard is to file your return as soon as possible. However, new laws are in place that attempt to prevent fraud by requiring the IRS to wait until February 15th before refunds are issued for households taking advantage of certain tax credits. Ideally, the delay allows the IRS more time to match W-2 forms with wage data from employers. Regrettably, the delay is affecting lower income families who depend on their refunds for living expenses.
As taxpayers increasingly rely on electronic methods to carry out financial transactions, both the taxpayer and IRS have to navigate a balance between security and convenience. If you’d like help with your taxes, the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
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