How to Avoid Tax-Related Identity Theft

From celebrity impersonation scandals to television and movie premises, identity theft has pervaded American culture. However, despite universal knowledge of the nature of identity theft, few know how to adequately protect themselves from it. Complicating the matter are the multiple types of identity theft, of which the public is only familiar with a few. This article will teach you how to secure yourself against a less-known, more insidious form of identity theft: tax-related identity theft.

The IRS defines tax-related identity theft as "when someone uses your Social Security number to file a tax return claiming a fraudulent refund" (2). Unlike in many other forms of identity theft, the victim of tax-related identity theft may be unaware of the crime for months, until the IRS notifies them that multiple tax returns have been filed. Identity theft for tax purposes has increased over the past few years, with the IRS paying out $5.8 billion in fraudulent refunds in 2015 (3).

With such high historical incidences of stolen identities, you may find it surprising that identity theft has not always been a federal crime. Originally, all forms of identity theft fell under the category of "false personation" statutes (4), which could be treated as either misdemeanors or felonies, according to state laws. The Identity Theft and Assumption Deterrence Act of 1998 changed this policy, instating identity theft as a federal crime and establishing the Federal Trade Commission (FTC) as the main contact venue for identity theft reporting. It also increased the penalty - up to 15 years in prison, with additional fines.

Despite the stringent laws protecting US citizens from tax-related identity theft, there still seems to be a rising occurrence of these crimes. Unlike robbery or other forms of theft, the signs of identity theft (and specifically tax-related identity theft) are much more subtle and difficult to notice. It takes a diligent and well-versed citizen to spot these signs.

If you wish to ensure the security of your identity against tax-related identity theft, here are a few steps to follow (5):

1. If you receive an email claiming to be from the IRS asking for your Social Security number or other personal information, do not reply or open any attachments. Instead, forward it to phishing@irs.gov.
2. If you file your tax returns and receive a notice from the IRS saying more than one return has been filed, immediately contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.
3. Keep your Social Security Card at home unless you are aware you will need it.
4. Get educated. There are numerous resources to help you prevent tax-related identity theft, many of which were used to create this article. For more information, visit https://www.irs.gov/uac/ten-things-to-know-about-identity-theft-and-your-taxes