The Internal Revenue Service announced two weeks ago a crackdown on identity thieves stealing tax refunds. They levied 939 criminal charges in connection with an investigation of 105 people in 23 states. Since then, the scope of the problem for innocent taxpayers whose refunds are snatched has been coming into focus.
From 2010 to 2011, there was a 500 percent increase in fake tax returns intercepted by the IRS, MSNBC says. The agency was able to stop $1.5 billion in refunds from going to phony claimants filing 262,000 fake tax returns. But IRS concedes it will never be able to stop identity theft tax fraud altogether.
Signs You May Be at Risk
The IRS publishes a guide to identity theft tax fraud for taxpayers. Many taxpayers who become victims of tax refund identity theft find out when they receive some sort of notice from the IRS, it says. Those notices might not report suspicion of identity theft, however, but may instead identify discrepancies concerning your tax return. Common signs would include multiple tax returns filed under your social security number; notices indicating refunds due, liabilities owed, or collection action taken prior to your filing a return; or IRS notification of reported wages for you by someone who was never your employer.
Guarding Against Identity Theft Tax Fraud
Safeguarding your social security number and ensuring the privacy of information on your computer are critical to protecting yourself from any identity fraud, including tax refund theft.
The IRS never asks for taxpayer information by phone or email, so if you receive such a communication, don't provide the requested information. Do report the contact to the IRS.
If you get an IRS letter that does not square with your circumstances (see "signs you may be at risk"), contact the agency immediately.
Follow the same guidelines as you would to protect yourself from any other identity fraud when it comes to tax information.
Ensure your social networking pages don't help identity thieves. According to the Southern Colorado Better Business Bureau, computer programs can accurately guess social security numbers 8.5 percent of the time using information found on Facebook and other social networks. Hometowns and birthdates are particularly helpful information for identity thieves, so avoid making them public.
If you believe your personal information has been compromised, alert the IRS Identity Protection Special Unit immediately at 1.800.908.4490. That unit will tag your account and try to stop any identity theft before it occurs, the National Association of Enrolled Agents says. You'll be asked to provide Tax form 14039, an identity theft affidavit.
Stolen Refund, Out of Luck?
If your tax refund is stolen, ask the IRS to open an investigation. The agency will work with you to get you any refund you may be due, Identity Theft Resource Center says. They will also help clean up your tax record so the fake information doesn't come back to haunt you. Smart Money says the process takes about six months.
Carol Bengle Gilbert writes about consumer issues for the Yahoo! Contributor Network.