Tax season may be over, but for many Americans who have experienced fraud related to their tax records, the nightmare of dealing with identity theft is just beginning.
Over the years, identity theft has emerged as one of the top problems facing honest taxpayers, who go to file their federal tax returns only to find out that an identity thief has beaten them to it.
In addition to collecting undeserved tax refunds, crooks often file using stolen identities and claim multiple dependents to apply for the federal Earned Income Tax Credit. These thieves may also create fake businesses, fake children, and other details to get a very nice refund.
Another scheme involves stealing an identity to help hide a criminal conviction, illegal-immigration status or other problem that could block them from getting a job. Victims have unknown W-2 wage reporting forms linked to their Social Security numbers and don’t discover the problem until the IRS contacts them with questions about under-reported income.
According to an article in USA Today, Federal Trade Commission complaints involving tax returns linked to identity theft rose to 20,782 in 2007, up 158% since 2003. Similar complaints to the IRS Taxpayer Advocate jumped to 3,327 in federal fiscal year 2007, up 644% in three years.
Identity theft victims confront weeks or sometimes months of bureaucratic wrangling to verify their identity at best, or suffer longer-term financial damage at worst.
What can you do to avoid identity theft?
• If you do not prepare your own return, be careful in choosing your tax preparer. That person will have access to your personal financial records.
• Know that the IRS does not communicate with taxpayers through e-mail, so if you receive any request for information via email, it is fraudulent–a scam known as phishing.
• If you do receive a notice from the IRS that leads you to believe someone may have used your social security number fraudulently, notify the IRS immediately.
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