The How and Why of Tax Identity Theft

Identity theft is not one single type of crime. There are many different ways a criminal can use your information, such as applying for government benefits, getting a job under your Social Security number, receiving medical care or prescription drugs in your name, and of course, the financial aspects. But stealing from your bank account or signing up for a new credit card in your name are just scraping the surface when it comes to the harm identity theft can cause.

Tax identity theft occurs when someone uses your compromised information to file a tax return in your name. They fudge the numbers, enter an unrelated refund dispersal option like a prepaid debit card, and make off with your money before you ever know that anything has gone wrong.

How do they get their hands on your data in the first place? There are many ways, including:

• Imposter scams
• Data breaches
• Stolen mail or W-2s
• CEO/HR phishing scams
• Corrupt insiders/tax preparation services
• Unsecured and public Wi-Fi hotspots
• Social Security number that is lost, stolen or compromised

Of course, it’s just as easy for a criminal to purchase your previously stolen information online, then use it to file a fraudulent return.

How can you know if someone has filed a return with your stolen information? Again, you may find out in different ways, but one common way is for the IRS to inform you.

They don’t usually call you up and say, “Guess what? Someone stole your identity!” Instead, it’s a lot more likely that the IRS will reject your legitimate tax return because someone has already filed using your Social Security number. Another way is someone not necessarily filing the entire return in your name, but rather claiming your dependents on their return if they’ve stolen your kids’ identities; in that case, the IRS will still contact you about the duplicated dependents. Finally, the IRS might contact you if someone files a business return involving your identity as an employee and the agency wants you to answer for the unreported income you supposedly earned but didn’t list on your return.

The fact of tax identity theft is that hundreds of millions of consumers’ identities have been compromised in different data breaches over the years. That means no one is immune from the threat of having their tax refund stolen.

For more questions and answers about tax identity theft, read our tips here.

Contact the Identity Theft Resource Center for toll-free, no-cost assistance at (888) 400-5530. For on-the-go assistance, check out the free ID Theft Help App from ITRC.

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