When most individuals hear the word “identity theft,” the first thing that comes to their mind is illegal activity on their bank accounts or credit cards.
However, identity theft in reality is far more difficult. In point of fact, identity theft is comprised of several subtypes, some of which are more difficult to recognize than others. One of these subtypes is financial identity theft.
In addition to depleting bank accounts and racking up credit card debt, identity thieves may also take the victim’s tax return, use the victim’s health insurance to pay for medical treatment, or sell the victim’s personal information to other criminals.
If the circumstances are dire enough, a thief could even confess to the theft as they are being arrested, therefore generating a false record of criminal activity. It’s possible that the people whose identities have been stolen won’t find out about the crimes committed against them until after major damage has been done to their financial resources, credit, and reputation.
What To Do if Someone Filed Taxes in Your Name?
In most cases, taxpayers who file fake tax returns do not risk having their refunds withheld even if doing so might be an inconvenience.
According to the prognostications of Bill Smith, managing director of the National Tax Office of the accounting firm CBIZ MHM, which is located in Bethesda, Maryland, everything will most likely turn out all right. On the other hand, this does not necessarily guarantee that you will get your money back straight soon. Smith estimates that it takes the Internal Revenue Service about six months to examine a claim and provide a refund to the appropriate person in the majority of these scenarios.
You will not have to worry about your refund being delayed if you take the necessary procedures to prevent tax-related identity theft in the first place. Keep reading to learn how to secure your data, how to recognize when someone has filed a bogus tax return in your name, and what steps to do if you find yourself in the unfortunate position of being a victim of identity theft.
Complete a tax return using the paper form. Even if the IRS rejects the electronic version of your return, you are still responsible for filing. Make sure that your paper return, together with any necessary payments, is submitted by the due date in order to avoid having to pay late fees or being subjected to tax penalties.
Send in Form 14039. Include a Form 14039, Identity Theft Affidavit, that you have filled out and signed together with your paper return. If you feel that your identity was stolen from you or if you get correspondence from the Internal Revenue Service, you may also fill out and submit this form. The Identity Theft Victim Assistance group will then take up your case and ask for identity proving papers when they have reviewed them. Depending on the specifics of the case, the copies of your driver’s license, Social Security card, and utility bills that constitute this proof may take a variety of forms.
A report must be made with the police. Following that, you should report a criminal offense to the local police in your neighborhood. It is quite improbable that law enforcement will start seeking for the perpetrator of the crime. If, on the other hand, your identity is stolen and used to rack up debt, having a record on file may be useful in thwarting efforts to collect on the debt.
Your con may very well be a part of a larger local fraud ring that operates in the area. When the authorities have more information, they have a better chance of putting a stop to the criminal activity. Depending on the size of your community’s police force, there could even be a division in charge of investigating and prosecuting identity theft and other financial crimes.
Share the details of the problem with the Federal Trade Commission. Even while the FTC does not conduct investigations into cases of identity theft, it does track data on the crimes and offers helpful information on its website for taxpayers who are dealing with this problem. Visit the website IdentityTheft.gov in order to file a theft complaint and get a recovery plan.
It is necessary to make a request for a copy of the fraudulent return. Identity theft victims have the legal right to get a copy of the fraudulent tax return that was filed using their Social Security number as the taxpayer identification number.
By seeking a copy of the return, you will have the ability to determine which of your family members’ personal information was used by the thief. Use the Form 4506-F to submit a request for a refund.
Examine the statements for your accounts as well as your credit report. It is likely that filing a false tax return is only the first step in a larger scheme. Thieves who steal identities often put the information they steal to use in many illegal activities.
Place a freeze on your accounts to protect your credit. You may request that your credit be frozen by calling the three major credit reporting companies, which are Experian, TransUnion, and Equifax. This manner, it will be impossible for anybody to make a new credit application under your name. Bear in mind that if you wish to create a new phone or utility account, or if you agree to a credit check in any other manner, you will be required to lift the freeze for the period of the credit check. This is true regardless of the method in which you gave your permission to have your credit checked.
For tax filing, acquire a PIN. You may add an extra layer of protection to your tax return by using a personal identification number that was provided to you by the Internal Revenue Service. You are eligible to get a six-digit IP PIN if the Internal Revenue Service (IRS) issued you a letter inviting you to opt-in to the program, if you submitted your tax return from a specific state such as Georgia or Florida, or if you filed in the District of Columbia. However, once you have a PIN, you are required to use it whenever you submit taxes.
Most Common Types of Identity Theft
Because cybercriminals are continually working to improve their abilities and come up with new plans, a little bit of information might go a long way toward preventing them from committing their crimes.
Here are five common methods of identity theft that you should be aware of in order to stay one step ahead of cybercriminals.
Artificial Identity Theft
One of the most quickly developing subcategories of financial crime in the United States is known as synthetic identity theft, which refers to the process of creating new identities by utilizing data stolen from real people.
In order to establish a bogus profile, con artists may extract information from the profiles of real individuals, such as birthdates, addresses, and Social Security numbers. After that, they may use this identity to apply for loans or credit cards, or they could do other types of financial crimes. Children and the elderly, both of whom are less likely to use their Social Security numbers, are often the targets of this kind of fraud.
The ability to recognize warning signs and respond appropriately in a timely manner is the single most important factor in preventing synthetic identity theft. Be on the lookout for new credit account phone calls or letters, as well as any mail that has your address printed on it but is sent to someone else. Also, be wary of any mail that has your address printed on it but is addressed to someone else. You may increase the level of protection you have for yourself by placing a security freeze on your credit reports and doing periodic checks on them to look for unusual changes.
In addition, there are services that monitor your identity and scan for Social Security numbers that have been hacked anywhere on the internet, including the dark web. If you suspect that you or a member of your family is a victim of synthetic identity theft, you need to get in contact with the relevant financial institutions so that you may inform them of the situation.
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IRS Check Scam
Fraudsters will pose as Internal Revenue Service employees, other government employees, or debt collectors over the phone, online, or through the mail in order to trick you into sending money for taxes, fines, or fees that you do not actually owe. This will allow them to trick you into paying the money to them. Every year, consumers lose millions of dollars due to fraud committed by the IRS.
Tax Return Fraud
Fraud in the tax system is not only an error; rather, it is an intentional attempt to evade payment of taxes. Showing that the defendant intentionally or knowingly took efforts to avoid paying taxes is essential to proving that the defendant committed tax fraud. Some examples include failing to file a tax return or making up a return to avoid paying taxes.
It would seem that the penalties for a single mistake is severe, but the repercussions of being proven guilty of tax fraud are even more severe. If you fail to submit your taxes, you might face up to a year in prison and a fine of up to $100,000. However, if you attempt to avoid paying your taxes, you could face up to five years in jail and a fine of up to $250,000.
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Ways of Protecting Yourself From Tax Identity Theft
If someone steals your identity for tax purposes, they very certainly have no intention of paying the taxes they owe in the past using your identity.
Your tax refund is what he or she is hoping to get their hands on. You may guarantee that your tax return is sent to you rather than a thief by doing a few simple habits that, when combined, will protect the confidentiality of your personal information.
1. Don’t carry your Social Security card around with you
The Internal Revenue Service (IRS) and state tax authorities identify taxpayers by using their Social Security numbers (SSNs). As a result, identity theft involving tax returns almost always involves a stolen SSN.
The con artist will use your stolen Social Security number to submit a fraudulent tax return at the beginning of the tax season, before you are likely to file, and will then pocket the refund. To reduce the risk of having your identity stolen, it is best to keep your Social Security card locked up safely at home and to avoid carrying any papers that include your SSN.
2. Keep your Social Security number private
Because safeguarding your Social Security number is critical, you should keep it a secret. Do not reveal your Social Security number to anybody unless it is absolutely necessary; do not give it out over the internet or just because a corporation asks for it.
In addition, make sure that your Social Security Administration earnings statement is reviewed on an annual basis so that you can confirm that all of your information is correct.
3. Make sure your passwords are secure and easy to remember
It is not necessary to have a technical background in order to protect your accounts from being hacked.
You should begin the process of logging in to any financial website you use, such as online banking or brokerage accounts, by choosing a password that is both safe and unique to you. It is recommended that passwords not be stored automatically on your computer, especially on business computers, and that you change your passwords on a regular basis.
4. Protect your PC from malicious software and spam
Develop a routine for utilizing a firewall, anti-spam, and anti-virus application, and make use of the security software updates that are provided by your operating system.
Before you donate or get rid of an old computer, you may want to think about erasing all of the data on its hard drive using a program that wipes data. This will ensure that the data cannot be retrieved by anybody else. You also have the option of removing the hard drive and taking it to a professional to have it wiped clean.
Identity theft is a serious crime, however, the intensity of the situation still does not stop scammers from trying to steal the identity of an individual for personal gain. Remember to keep your personal information and details stored in a safe place so scammers cannot get to them.