Watch Out for Tax Refund Fraud

by Miranda Marquit · 0 comments

Tax season is underway, and that means that fraudsters are starting to pick up the pace. One of the growing forms of identity theft is tax refund fraud. Identity thieves file a tax return with your social security number on it, posing as you, and then pick up your refund. You might not even know about it until you try to file your own return, and find that your refund has already been “paid.”

How Tax Refund Fraud Works

This type of identity theft is fairly easy to perpetrate. The identity thief gets your Social Security number from some information source, whether they hack a database, or find information with your number lying around. The thief fills out a tax return, using your Social Security number, and maybe even your name, but putting a different address on the form. Then, the fraudster just has to file the tax return before you do. (This year, the earliest you can file is January 30, 2013.)

An identity thief can also claim refundable credits, like EIC, on your behalf in order to boost the amount of the refund. The IRS receives the tax return, processes it, and then issues the refund. When you try to file your return, you receive a notification that a return bearing your Social Security number has already been filed. This can be frustrating and disappointing, especially since you won’t get your refund until the situation is resolved.

What You Should Do if You are a Victim of Tax Refund Fraud

The good news is that you do have options if you are the victim of tax refund fraud. First of all, if you find out that a refund has already been filed with your Social Security information, you need to file a Form 14039 with the IRS. This form is designed to help the IRS know that there might have been a breach, and that fraud could be involved.

When you file your Form 14039, you will need to include documentation that proves your identity. You might need to mail or fax copies of your passport, driver’s license, or ID card to the IRS. You might also be required to send in other identification. Remember to only send copies; you should never part with original documents.

Once you have notified the IRS of the problem, an investigation will take place. However, it can take months before things are sorted out and you receive the tax refund you are entitled to. While you wait for the IRS investigation to be completed, you need to move forward to protect yourself in other ways. First of all, the reality is that your Social Security number is clearly out there. Consider placing a credit freeze on your identity so that identity thieves can’t use your information to open credit accounts. Double-check all of your accounts and your credit report, and watch for signs of fraud. You can also report the problem to law enforcement authorities.

While the fraudster probably won’t be caught, you can at least limit the damage to yourself, and make sure that you do everything possible to get the tax refund you have coming.

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