Tax Season Terrors: Identity Theft
As we dive into the heart of tax season, CPAs need to educate clients on tax return and tax-related identity theft. Tax return identity theft occurs when someone uses a taxpayer’s personal information to claim refunds or other credits that the taxpayer is not entitled to. Thieves tend to file early on to avoid receiving duplicate return notices from the IRS.
If a taxpayer falls victim to tax return identity theft, their refund will be significantly delayed until all signs of fraud have been resolved. Because clearing a person’s name in a tax-related fraud takes a lot of time and money, victims may also lose job opportunities, be refused loans, education, housing or cars.
Most thieves rely on email and telephone phishing and dumpster diving as ways to obtain personal information. They are looking for discarded tax returns, bank records, and other documents containing personal and financial information. The IRS has a filter system in place that distinguishes legitimate returns from fraudulent ones. If the filter catches a suspicious return, it is manually reviewed to validate the taxpayer’s identity.
For more information on how to prevent identity theft and what to do if you’ve become a victim, please visit The Journal of Accountancy.