Tax Fraud & Identity Theft

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It’s that time of year again, when April 15th is looming right around the corner and everyone is pushing it to the last minute to get their tax returns done and filed. You’ve worked hard to get the maximum refund possible, saving every little receipt and researching every available credit to make sure you don’t miss anything. Here’s some helpful information if you become one of the many unfortunate people every year who file for their refunds – only to find out that a fraudster beat them to the punch.

Rejected Returns

You’ve filed your taxes and you’ve breathed your sign of relief that it’s done. Then you get a notice from IRS that your return has been rejected. Now what?

First, check the reason why your return was rejected. The most common reason for a federal return to be rejected is due to someone else having already filed a return using a Social Security number (SSN) that you’ve listed on your form (yours, your spouse’s, or your dependent’s). Double-check to make sure you didn’t accidentally enter a number wrong. If you’ve checked your entries and they are correct, you may have been a victim of identity theft.

The IRS is noticing an increase in the number of federal tax returns filed using other people’s SSNs, particularly those belonging to children. A true-life example: a couple in Washington had their return rejected by the IRS this year because someone else had claimed their 21-month old daughter (who died last summer) on their tax return. Children and deceased individuals are particularly prone to identity theft, as their SSNs and credit reports are not generally checked or tracked.

The IRS has also reported that many claims for the First Time Home Buyer’s Tax Credit have been filed by individuals using SSNs belonging to children.

If this should happen to you, immediately file a police report for identity theft. Gather all pertinent documents (copies of the rejection letter from IRS, the Social Security cards involved, even birth certificates if needed) and provide copies when you file the report. Then call the credit bureaus, place a fraud alert on the affected SSNs, and obtain copies of credit reports. Provide a copy of the police report if possible, or at least the report number, to the credit bureaus and to IRS – don’t delay on this. For more information about all forms of identity theft, please visit http://www.ftc.gov/idtheft and download “Take Charge: Fighting Back Against Identity Theft.”

For more information about this and other types of tax-related identity theft, please visit Identity Theft and Your Tax Records (on the IRS website).