Tax Identity Fraud-How to Protect Yourself

With tropical storm intensity, Florida is currently leading the nation in tax identity fraud cases. A previous Tax Matters blog post cited a recent CNBC article titled “Florida Hit by ‘Tsunami’ of Tax Identity Fraud” that underscores the severity of this major, nationwide tax problem the IRS has been unable to resolve. According to the CNBC article, however, tax identity fraud is more than just a nuisance. It has now grown into a massive, often dangerous, illegal industry. The article points out three main facts about this pernicious crime:

Tax Identity Theft:

  • Has Grown 25% in 3 years.
  • Could cost the nation $21 billion over the next five years.
  • Has risen to more than 1.2 million cases in 2012 from only 48,000 in 2008.
  • Has been called “a tsunami of fraud.” by U.S. Attorney for South Florida, Wifredo Ferrer.

Florida is the Epicenter of Tax Identity Fraud

  • Most of the fraud is concentrated in Miami and Tampa.
  • Miami has 46 times the per-capita rate of false tax refund claims than the rest of the country, and 70 times the national average in terms of dollars.
  • Thieves appear to be exploiting Florida’s high proportion of older more vulnerable residents.

Tax Identity Crime Linked to Violent Crime and Armed Gang

  • Identity theft rings steal the master keys from a postal worker (sometimes killing them in the process) to gather personal taxpayer information.
  • Using these stolen names and Social Security numbers, criminals then file phony electronic tax forms to claim refunds well before the taxpayer has had a chance to prepare their tax refunds or the Internal Revenue Service to discover the fraud. (This previous post tells identity theft victim, Robert “Sully” Sullivan’s similar story.)

How to Protect Yourself from Tax Identity Fraud

All thieves need to commit tax identity fraud is a taxpayers name and the tax ID number. Since it could happen to anyone at any time, the following nine steps can help consumers protect themselves from falling victim to tax identity fraud:

  • Don’t be misled by sites that claim to be the IRS but end in .com, .net, .org. The address of the official IRS website is
  • Never give personal or financial information out online even if it appears to be the IRS or another taxing authority.

If you are already a victim of tax identity fraud or think you might be, the following steps will help you unwind your IRS tax issue nightmare:

  • Contact the IRS, fill out Form 14098, file 2011 taxes and inquire about new social security number.
  • Contact your local Police Department to file a report.
  • Contact Consumer Affairs to file a report.
  • Contact the State Attorney General’s office and your City attorney to file a report.
  • File a complaint with the Consumer Financial Protection Bureau (CFPB).
  • Contact all three credit agencies to see if other types of credit were used in your name.
  • Important note: If you receive a notice of liability from the IRS, contact IRS Collections immediately to let them know there is an identity theft tax issue and to put a Collection Hold on his record. This important step can avoid your risk of an IRS levy.

According to the article, the IRS is looking to preempt tax fraud by authenticating social security numbers of both living and deceased taxpayers at the time of filing. Nevertheless, in the eyes of the IRS, you are responsible for your tax account and will come after you for payment no matter what.  Be proactive and make sure your tax account is clean and IRS problem free.

More Tax Help, IRS News and Tax Relief Tips:

  1. IRS Warns of “Dirty Dozen” Tax Scams
  2. Identity Theft Prevention – Florida Scammers in Prison
  3. Senate Confirms Keneally to Fight Tax Crime
  4. TaxMan on Big Biz Show-Avoid Business Audits
  5. Proposed Law Could Revoke Passport for Tax Debt

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