Identity Theft Presents a Threat to Any Taxpayer
While I’ve not yet been the victim of identity theft, the possibility and the consequences are beginning to be imminent.
Identity theft can cause particular trouble when it’s done in connection with taxes. The Treasury Inspector General for Tax Administration says that over 640,000 taxpayers were affected by identity theft in calendar year 2011, up from 270,500 in calendar year 2010. These cases threaten to overwhelm IRS resources, according to TIGTA, which noted that taxpayers whose identities are stolen receive confusing and conflicting instructions from the IRS and delays of sometimes longer than a year to resolve their tax problems. This year we had a number of cases that we couldn’t e-file because the Social Security Number had already been filed on a return.
Linda de Marlor, president of Rockville, Md.-based Tax-Masters and “Tax Lady” on C-Span recently stated the following, “We are working now on the case of a widow whose husband’s Social Security number was stolen a week after he died. The IRS has told us that she must now do paper filing for the next three years. It will take many months to sort out her federal and state refunds since the perpetrator has already filed false refund requests.”
In a report issued last month, TIGTA noted that identity theft was the number one consumer complaint last year to the Federal Trade Commission, and the most common form of reported identity theft involved government documents. The report noted that the IRS does not work identity theft cases in a timely manner and can take more than a year to resolve them. This should change, since the IRS agreed with a number of TIGTA recommendations and has made solving the problem a priority.
This is important, because you only find out about your taxes when it’s time to file your return. But if your refund has been stolen, other things could be happening as well. Given the doubling of tax-related identity theft from 2010 to 2011, it’s likely that one of us or someone close to us will soon be a victim. So don’t just trash your mail, shred it first. And consider signing up for one of the protection services. If the trend continues, it might also be a good investment to purchase some of their stock.
RECOMMENDATIONS:
One of the best and most inexpensive ways to deter identity theft besides shredding all documents, changing passwords frequently, and not accessing financial accounts on unsecured wi-fi servers is to have a security freeze placed at the three credit reporting agencies. Anyone attempting to open a new credit account (loan, mortgage, credit card, bank account, etc.) is told there is no information available for the social security number. You can apply for a temporary lift when it is necessary to apply for new credit which can be done by phone.
