Updated: Mar 23, 2021
Identity theft: Once it happens, it creates major problems for the victim. It can happen at any time, but tax filing season has always been a favorite time for it. This year, the Covid-pandemic added some new flaws to it.
How does a victim gets aware of a identify theft related to a tax return?
Often the victim is unaware of the theft until the e-filing of the tax return is rejected, because there has been already filed a return by someone else. Sometimes the first time a victim gets aware is when getting mail from the IRS informing about a suspicious return, and sometimes the first sign is a notice of an online tax account of taxes owned.
What can you do to avoid tax-related identity theft?
The basic precautions are the same as for any other scam: protect your personal information, like SSN and driver's license number, use a secure internet connection for filing, and store documents safely.
Additional protections against tax-related fraud are:
File your taxes as early as possible, do not wait until the last minute: As soon you have received all tax forms, you should file your tax return. This gives criminals less time to act on behalf of you.
Make sure your mail box is safe: mail theft is common during tax season. Getting as many documents as possible online and checking your mail box daily helps reducing the risk. Or you could rent a P.O. Box for your mail.
If using a tax preparer, make sure you check its credentials and ask for references. Do not deal with any agent you don't feel comfortable with or you don't trust their security and privacy protection. Check the IRS-page to make sure the tax preparer is registered with the IRS.
Keep in mind that the IRS will not call, email or text you about your tax return. Do not give any personal information to such requests.
Document disposal: always use a shredder to dispose old or unneeded documents with any personal or financial information
Check all tax forms you receive for possible errors. Especially if you receive a document 1099-G (unemployment benefit payment) and you did not file for unemployment, somebody might have used your identity to get benefit payments. Check the IRS for more information!
Steps to do if you are affected by tax identity theft:
If you receive a notice from the IRS about a suspicious return, you are required to verify your identity within 30 days. You will receive instructions for this process. After that, you will get guidance for the next steps.
If your tax return is rejected because it has already been filed in your name, you have to return the IRS form 14039 (Identity Theft Affidavit).
Check with your state whether a fraudulent return has been filed.
Get your free credit reports and check the for errors.
You can get help with those actions also from the Identity Theft Resource Center.
Special consideration due to the pandemic:
The deadline for filing the federal tax return is May 17th this year. This gives more time to sort things out for more complicated returns
Taxation of unemployment benefits and stimulus checks received in 2020: Not all the details are defined yet on federal and state level - check back on with the IRS and your state if it affected you
If your tax return is similar than in a normal year, don't wait with filing. But don't rush before final decisions with impact on your return are known, or you may end up filing an amended return later on!
"Identity Theft and Credit Protection" will be the topic of our April zoom-meeting of the "Money Talk with a Daily Money Manager"-series hosted by Rita Kuehnis, SDS Smart Daily Services LLC. The meeting is scheduled for Thursday, April15th at 6 - 7 pm PST. Register here