Identity theft is becoming more rampant each year in all facets of our financial lives. The IRS is not exempt from hackers and has had its systems breached a number of times. During this past filing season, while still a small percentage of filers, we had an increased number of our clients’ electronic returns rejected by the IRS. The most common reason for this occurrence was someone had already used the taxpayer’s social security number and filed or attempted to file a return on their behalf. This has become a common problem for all professional tax preparers as well as anyone filing electronic returns.
The cyber criminals attempt to use falsified W-2’s (or other similar documents) and the taxpayer’s social security number to create a refund and then collect it. Then, when the real file is electronically submitted it is rejected because the fake one was already in the system. The only way to go ahead and file a return is to submit a paper filed return and provide the Internal Revenue Service an explanation. This is very frustrating to legitimate taxpayers because they had done nothing wrong.
We have also seen other types of scams this year. The most notable one was someone calling the taxpayer’s home number asserting that they were from the IRS and claiming that they were going to file a lien against the taxpayer’s bank accounts in county court if they did not call them back. The number that they gave the taxpayer to call back did not correspond with the number that appeared on the caller ID service. The phone number that appeared on the caller identification service was an actual IRS number such as 1-800-829-1040. These are definitely scams. The IRS will not call you to collect money unless you have received written correspondence in the past surrounding a collection issue.
The problems created by the False Return Scam
The number of returns filed falsely with the Internal Revenue Service has been growing each year. Someone filing a false return in your name and social security number needs to be taken just as seriously as if someone had stolen your credit card. The effect that it can have on your credit score can be just as devastating.
One young man this happened to had a closing on a home loan held up because he could not prove to the bank that his return that he held in his hands was the one that was correct and the one in the IRS system was not. It took him over three weeks of working with the local IRS office and the bank before he could prove his income to the satisfaction of the bank so they would allow him to close the loan. Basically, there were two returns in the IRS system and the bank did not know which one to believe. This was all caused by identity theft that had occurred almost two years prior to him wanting to close his loan on his new home.
What can I do to protect myself?
One of the easiest and most obvious answers is to protect your personal information such as social security number, driver’s license, credit cards, etc. When making purchases online using your credit card, make sure the seller is reputable and well known. If it is necessary to make online purchases with sellers who aren’t as well known, consider setting up a PayPal© account or another third-party service.
Another suggestion is to consider enrolling in a credit monitoring service. There are several good providers, but you should check with your bank or major credit supplier and see if they offer this service or recommend a company.
Also, there are several resources available at the IRSto help you combat this problem. The IRS has a website that has a great deal of information regarding what you should do if you believe you are a victim of identity theft. It is www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft. It has information about specific actions you can take once identity theft has occurred.
You also need to be assured that we continue to monitor our systems, policies and procedures to maintain the security of our clients’ data. This may, at times, be an inconvenience for those we serve, but maintaining client security is very important to us.