Photo of Dr. Nikia Owens, Ph.D, Photo credit: Laura Elam
Tax-related identity theft is one of the most disruptive forms of fraud a taxpayer can experience. It occurs when someone uses your Social Security number, or your child’s, to file a fraudulent return and claim a refund in your name. Victims typically discover the fraud only when they attempt to file their own return and receive an IRS notice stating that a return has already been submitted under their SSN.
If this has happened to you or your child, this guide walks you through what to expect, the warning signs to look for, and the exact steps to take.
| Suspect that someone has filed a fraudulent return using your information? Act immediately. Speak with a CWF tax professional who can guide you through the recovery process. Book a consultation today. |
How Tax Identity Theft Happens
Thieves typically obtain Social Security numbers and use them to file fraudulent returns early in the filing season, before the legitimate taxpayer has had a chance to file. The fraudulent return claims a refund, which is then deposited into a prepaid debit card or bank account controlled by the thief.
SSNs are commonly obtained through data breaches at employers, healthcare providers, financial institutions, or government agencies; phishing emails or fraudulent phone calls that impersonate the IRS; stolen mail containing W-2s or financial documents; dark web purchases of stolen personal data; or the exploitation of deceased individuals’ SSNs.
Why Children Are Frequent Targets
Children’s Social Security numbers are particularly valuable to identity thieves because they are rarely monitored. A child’s SSN can be misused for years, sometimes until the child reaches adulthood, before the fraud is ever detected. Parents are advised to proactively check their children’s SSNs, particularly if the child has never worked, but their SSN shows income or a filed return in IRS records.
Warning Signs That Your Tax Identity Has Been Stolen
You may be a victim of tax identity theft if any of the following occurs:
• You attempt to e-file and receive a rejection notice stating a return has already been filed under your SSN.
• You receive an IRS notice about a return you did not file.
• You receive a notice about income from an employer you have never worked for.
• An IRS online account has been created without your knowledge.
• You receive an unexpected tax refund you did not request.
• You receive a notice about a balance due or collection activity for a year in which you already filed.
Immediate Steps to Take
The following steps should be taken as soon as you suspect or confirm tax identity theft:
Step 1: Respond to Any IRS Notices Immediately
If you receive a notice from the IRS, respond by the deadline stated on the notice. IRS notices will include instructions for victims of identity theft. Failing to respond can result in significant delays in resolving your case.
Step 2: File IRS Form 14039 — Identity Theft Affidavit
File Form 14039 as soon as possible. This form notifies the IRS that your identity has been compromised and initiates a formal investigation. It can be submitted online through the IRS website, by mail, or in person at an IRS Taxpayer Assistance Center. Supporting documentation should include a copy of your government-issued photo ID, proof of your SSN, and a copy of any IRS notice you received.
| Filing Form 14039 can be confusing. Our tax professionals are here to guide you through the process accurately and ensure nothing is missed. Book your consultation today. |
Step 3: File Your Legitimate Tax Return
Even if a fraudulent return has been filed in your name, you are still required to file your own return. In most cases, you will need to file by paper rather than electronically, as e-filing will be rejected. Attach a copy of Form 14039 to your paper return. The IRS will process your legitimate return during the investigation, though resolution may take significantly longer than usual.
Step 4: Report to the Federal Trade Commission
File a report at identityTheft.gov. The FTC will walk you through a personalized recovery plan and generate an official Identity Theft Report, which is useful when communicating with creditors and other agencies.
Step 5: Contact the Social Security Administration
If you believe your SSN has been broadly compromised beyond tax fraud, contact the Social Security Administration to flag your number.
Step 6: Place a Credit Freeze
Contact each of the three major credit bureaus, Equifax, Experian, and TransUnion, to place a credit freeze on your accounts. A credit freeze prevents new accounts from being opened in your name without your explicit authorization.
It is also worth noting that this article is only the first part of a two-part series; the second part will be published as fast as light.