Tax Return Theft: How to Safeguard Your Refund

Apr 17, 2012 6:05pm
gty tax form tk 120201 wblog Tax Return Theft: How to Safeguard Your Refund

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It is a day dreaded by most Americans, the day taxes are due, but for hundreds of thousands of taxpayers it’s just the beginning of a nightmare where they discover Social Security numbers have been stolen and fake returns filed in their name.

Tax-related identity theft is an exploding problem. The Internal Revenue Service paid out $1.4 billion in fraudulent tax refunds last year to identity thieves who filed false returns, six times more than in 2010.

Experts say the fraud is attractive to scam artists because people are unaware they have been scammed until their tax return is rejected.

The fraud is perpetrated in three ways:
1. A crook files a tax return using your name and Social Security number before you file your own.
2. A crook uses your Social Security number when hired for a job and the income from that job shows up as yours.
3. A crook steals the Social Security number of a child or elderly dependent of yours and claims them.

In order to minimize the likelihood of becoming a victim of identity theft the IRS has these recommendations:
1. Don’t carry your Social Security card or any document with your Social Security number on it.
2. Don’t give a business your Social Security number just because they ask for it. Only give it when it is required.
3. Check your credit report every 12 months.
4. Secure personal information in your home and on your computer.
5. Don’t give personal information over the phone or the Internet unless you initiated the contact or are sure you know who you are dealing with.

If you believe you are a victim of tax-related identity theft, here’s what you should do:
• File a report with the Federal Trade Commission’s Identity Theft database here.
• Call the FTC’s hotline for individual ID theft counseling: 1-877-ID-THEFT
• Place fraud alerts on your credit reports at www.experian.com, www.equifax.com and www.transunion.com.
• Contact the IRS Identity Protection Specialized Unit, toll-free at 800-908-4490.
• Visit the IRS Taxpayer Advocate Service, which has a helpful toolkit, here.
• Fill out the IRS Identity Theft Affidavit, Form 14039.

ABC News’ Lisa Stark and Elisabeth Leamy contributed to this report. 

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