Identity Theft and Taxes

by Joseph P. Trybula, CFP®, AIF®, Diversified Financial Advisors

Identity theft is one of the fastest growing crimes in America, affecting millions of unsuspecting individuals each year. A dishonest person who has your Social Security number can use it to obtain tax and other financial and personal information about you.

Identity thieves can get your Social Security number by:

Stealing wallets, purses and your mail.
Stealing personal information you provide to an unsecured website, from business or personnel records at work and from your home.
Rummaging through your trash, the trash of businesses and public trash dumps for personal data.
Posing by phone or email as someone who legitimately needs information about you, such as employers or landlords.

Tax-related identity theft occurs when a thief uses your Social Security number to file a tax return and claim a fraudulent tax refund. In 2018 alone, there were 649,000 confirmed identity theft tax returns.¹ The IRS has become increasingly diligent in its efforts to thwart identity theft with a program of prevention, detection and victim assistance. The “Taxes. Security. Together.” program is aimed at building awareness among taxpayers about the need to protect personal data when conducting business online and in the real world.

Stay vigilant

By remaining vigilant and following a few commonsense guidelines, you can support the IRS in keeping your personal information safe. Here are a few tips to consider:

Protect your information. Keep your Social Security card and any other documents that show your Social Security number in a safe place.
DO NOT routinely carry your Social Security card or other documents that display your number.
Monitor your email. Be on the lookout for phishing scams, particularly those that appear to come from a trusted source such as a credit card company, bank, retailer or even the IRS. Many of these emails will direct you to a phony website that will ask you to input sensitive data, such as your account numbers, passwords and Social Security number.
Safeguard your computer. Make sure your computer is equipped with firewalls and up-to-date anti-virus protections. Security software should always be turned on and set to update automatically. Encrypt sensitive files, such as tax records, you store on your computer.
Use strong passwords and change them routinely.
Be alert to suspicious phone calls. The IRS will never call you threatening a lawsuit or demanding an immediate payment for past due taxes. The normal mode of communication from the IRS is a letter sent via the US Postal Service.
Be careful when banking or shopping online. Be sure to use websites that protect your financial information with encryption, particularly if you are using a public wireless network via a smartphone. Sites that are encrypted start with “https.” The “s” stands for secure.
Google yourself. See what information is available about you online. Be sure to check other search engines, such as Yahoo and Bing. This will help you identify potential theft sources and also will help you maintain your reputation.

Afraid you have been scammed?

If you feel you are the victim of tax-related identity theft – e.g., you cannot file your tax return because one was already filed using your Social Security number – there are several steps you should take.

File your taxes the old-fashioned way – on paper via the US Postal Service.
Print an IRS Form 14039 Identity Theft Affidavit from the IRS website and include it with your tax return.
File a consumer complaint with the Federal Trade Commission (FTC).
Contact one of the three national credit reporting agencies – Experian, Transunion or Equifax – and request a fraud alert be placed on your account.

If you have been confirmed as a tax-related identity theft victim, the IRS may issue you a special PIN that you will use when e-filing your taxes. You will receive a new PIN each year.

For more information on tax-related identity theft, visit the IRS website, which has a special section devoted to the topic.

Contact Joe Trybula at [email protected] or 800.307.0376 for more details.

Disclosure: This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. Investment Advice and 3(38) Investment Fiduciary services offered through Diversified Financial Advisors, LLC, a Registered Investment Advisor. 3(16) Administrative Fiduciary Services provided by PISTL Service Corporation. Discretionary Trustee services provided by Printing Industries 401k Trustees. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

References

1. The Internal Revenue Service, IR-2019-66, April 8, 2019.