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How to Avoid This Tax Nightmare

By on March 8, 2016
Categories: TAXES, TIPS & TRICKS

Imagine this nightmare scenario:

You have finished your taxes and feel a sense of relief as you hit the button to submit your return to the Internal Revenue Service electronically. The government, however, blocks the return.

The problem? Someone else has already filed a fake tax return with your name and Social Security number!

Unbeknownst to a growing number of taxpayers, crooks are filing fake federal and state income tax returns to obtain refunds.

Thieves submit false returns, obtain refund checks and, by the time the real taxpayers file, the crooks have already cashed the checks. The victims then have to deal with putting their financial lives back together after getting their identities stolen in this way.

A report from the Government Accountability Office estimates that tax identity theft cost the IRS $5.8 billion in 2013. There are no more current statistics, but thieves stole records of up to 330,000 taxpayers in 2015.

The federal and state governments have been attempting to fight this cyber crime. For instance, some states alert taxpayers when a return is filed using their Social Security number. Some states also delay refunds until March 1 or later. In addition, many states require driver’s license information from individuals who file their own tax returns.

How to Fight Back

If you’ve been a victim of tax fraud, here are some things to do:

  1. File a complaint with the Federal Trade Commission at identifytheft.gov.
  2. Contact one of the three major credit bureaus to place a fraud alert on your credit cards.
  3. Contact your financial institutions and close any financial or credit accounts opened without your permission or tampered with by identify thieves.

If your Social Security number has been compromised and you know or suspect that you are a victim of tax-related identity theft, the IRS recommends that you take these additional steps:

  1. Respond immediately to any IRS notice. Call the number provided or, if instructed, go to IDVerify.irs.gov.
  2. Complete IRS Form 14039, Identity Theft Affidavit, if your electronic return is rejected because of a duplicate filing under your Social Security number or you are instructed to do so. Print, and then attach the form to your return when you mail it.
  3. Continue to pay your taxes and file your tax return, even if you must do so by paper.
  4. If you previously contacted the IRS and did not get a resolution, call 800 908-4490 for specialized assistance.

Reducing Your Risk

You should also know that the IRS does not initiate any contact with taxpayers by email, text message, telephone or social media to request personal financial information or payment.

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