Taxing Issue: How to Spot and Deal with Tax ID Theft

  
     
January 30, 2017

Tax ID theft is the most common form of identity theft in the United States, and during National Tax Identity Theft Week (Jan. 30 to Feb. 3) BBB Serving Metro New York is reminding businesses and consumers to take steps to safeguard their tax identity.

Tax ID theft happens when an identity thief files a fake tax return using someone else’s Social Security Number (SSN), or uses someone else’s Social Security Number to get a job. It can also happen when an imposter calls you up, pretends that you owe money to the IRS, threatens you with jail if you don’t pay up instantly – and then demands payment or identity information over the phone. 

It can even happen when a stranger claims your child as a dependent on a tax return, or files an improper return under your child’s name using a stolen SSN; when a scammer files a return under the SSN of a recently deceased person to steal money owed to the estate; or when a fraudulent tax preparer steals your tax refund. Reports of tax ID theft have grown in recent years as scammers and hackers find new ways to steal personal information from their victims.

“Tax ID theft is a growing menace to consumers and businesses,’ said Claire Rosenzweig, BBB President. “It’s more important than ever to safeguard your personal information – as well as that of children and elderly relatives - from identity thieves, both online and offline.”  

According to the Federal Trade Commission, tax-related fraud was the most prevalent form of identity theft in 2015 (the latest year for which data is available), accounting for 45 percent of identity theft complaints, up from 32 percent in 2014. 

Data breaches are a major source of information for tax ID thieves, and the IRS warns that victims of data breaches should monitor their credit reports closely, and contact the agency immediately if their tax return is returned as a duplicate. 

Credit reports also provide a way to detect possible fraudulent activity using stolen SSNs belonging to children or elders.  Most children should not have any credit histories, so the appearance of a credit record for a small child is a red flag. Improper accounts or debts may show up in credit records for older individuals. If you discover these kinds of issues, you can also check to see whether any fraudulent tax returns have also been filed with the IRS under the same SSN.

Consumers and businesses should also be mindful to shred any documents that contain personal information. ID thieves will sometimes rummage through garbage bins in search of documents with personal information that they can exploit.

Metro NY BBB Tips to Spot and Avoid Tax ID Theft:

  • As early as Spring 2017 the IRS plans to begin private collection of outstanding inactive tax receivables with four private contractors they have selected.  These private contractors will be authorized to collect, on the governments behalf, outstanding inactive tax receivables. Click here to see the names of the four companies contracted by the IRS, and other information about the program. The IRS stresses that if you owe back taxes you will not be contacted unexpectedly by a debt collector. The IRS will mail you several written notices informing you that the accounts are being transferred to the private collection agencies before the company will be allowed to contact you by phone. Payment will be not be made to private collection agency. The IRS warns consumers to be on the lookout for unexpected phones calls claiming they need to pay money or face legal action. That’s not how this will work
  • Be wary of tax preparers claiming they can get you more money back on your tax returns than you otherwise would through tax software or other tax preparers. Scammers will often use deals that are too-good-to-be-true to lure victims.
  • File your tax return as early in tax season as possible. If a tax ID thief is going to file a fake return in your name, they may try and beat you to it by filing early in tax season.
  • Check the BBB Business Profile for the tax preparer at www.newyork.bbb.org, and make sure they have a Preparer Tax Identification Number (PTIN).  Ask the preparer for references, and don’t give out your personal information until you have thoroughly checked the preparer’s background. 
  • Look for a well-established tax preparer with a physical business address and solid track record, who is likely to be easy to locate and in business well into the future, in case you need to consult that person about a return prepared for you.
  • Make sure your tax preparer uses secure methods for collecting and storing your private tax return information.  Ask what safeguards are used to protect your identity and financial data.
  • Always get a printed copy of a tax return filed in your name by a preparer.  Make sure it is signed by the preparer.  Do not allow it to be filed electronically unless you have reviewed it first, to make sure the details are correct and that any tax refund, if payable, will made to the proper party.
  • Contact the IRS immediately at 1-800-908-4490 if you receive a letter from them saying that a duplicate tax return has already been filed in your name.
  • Contact the IRS at once if you get a notice saying you received wages from an unknown employer; that you owe back taxes on income you did not earn; that you owe taxes for a year in which you did not file a tax return; or that something else has happened with a tax return that you know is not correct.

Visit Metro NY BBB’s Facebook page or Twitter account for more tax ID theft related tips throughout the week of Jan. 30 to Feb. 3. For tips on how to avoid and recover from ID theft, including tax ID theft, in both Spanish and English visit bbb.org/new-york-city/identity-theft/. 

For more consumer tips, or to search for a tax preparer you can trust, visit newyork.bbb.org.  To view scam trends or report a possible scam, visit BBB’s Scam Tracker at bbb.org/scamtracker/new-york-city.