Identity theft hits your finances, but also can affect your taxes, too.
Identity theft is one of the fastest growing crimes in the United States, with as many as 10% of Americans over age 16 victims last year, according to a bulletin from the Bureau of Justice Statistics. Identity theft is a type of fraud in which a thief uses your personal information to conduct transactions in your name.
Criminals may, for example, use your identity to open or empty bank accounts, obtain credit cards, or take out loans. In addition to fraud directly concerning your finances, thieves can also use your information to commit crimes that may affect your taxes.
Types of fraud
With your identifying information, an undocumented worker or another individual may use your Social Security number on job applications and employment paperwork. The employer would then report the thief’s W-2 wages earned to the IRS using your information. As a result, when you file your tax return, it will appear to the IRS that you did not report all of your income.
An identity thief may also file a tax return using your name and Social Security number in order to obtain a refund. When you later file your return, the IRS might believe that you already filed and received a refund; therefore, the return you submitted would be considered a second copy or duplicate.
Before you become a victim of identity theft, consider these steps to help protect yourself.
If you must give out personal information, be aware of your surroundings and do it discreetly.
Do not give out personal details over the phone unless you have made the call yourself.
Properly destroy any documents, receipts, or pieces of mail that contain information an identity thief might find useful, including your bank account information, Social Security number, address, and birth date.
Avoid using your Social Security number as part of a password or pin number, or on your driver’s license, unless absolutely necessary.
Secure your personal computer using firewall programs, antivirus software, and secure browsers before revealing personal information online.
If you receive a notice from the IRS that leads you to believe that your personal information has been used to commit tax fraud, contact the IRS by phone or in writing as directed in the notice. Possible triggers indicating you may have been the victim of identity theft include statements that you received wages from an employer unknown to you or that more than one tax return was filed in your name.
IRS tax examiners can work with you and other
agencies, such as the Social Security Administration,
to resolve these discrepancies. It is important to note
that the IRS will not initiate a request by e-mail for
taxpayer information in this, or any other, situation. If
you do receive such a request, it may be an attempt
by identity thieves to obtain your tax information.
In addition to other precautions you may take to
protect your identity from thieves, the IRS
recommends that you be extremely careful when
choosing someone to assist you with tax preparation.
Because this person will have access to your
personal financial records, be sure to research his or
her credentials and experience. Avoid preparers who
guarantee results, base fees on a percentage of the
amount of refund, or claim they obtain larger refunds
than other preparers.
Identity theft can be a financially and emotionally
devastating ordeal. For more information about
identity theft and what to do if you become a victim,
visit the FTC’s website.
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This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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