Identity theft continues to be an area of concern for the IRS. According to a recent Government Accountability Office report, the IRS paid $5.8 billion in refunds for 1 million fraudulently filed returns in the 2013 filing season.
Unfortunately, legitimate taxpayers who are the victims of identity theft face a long process to fix the damage caused by the theft. A March 2015 report from the Treasury Inspector General for Tax Administration found that during fiscal year 2013, the IRS took an average of 278 days to resolve identity theft cases, and 10 percent of those resolutions might have been incorrect.
Taxpayers might be victims of identity theft if they receive a letter from the IRS indicating that more than one tax return was filed using their Social Security number, that their refund has been modified unexpectedly, or that they owe tax beyond what they expected. The IRS suggests that taxpayers who think their identity has been stolen take the following steps:
- File a report with law enforcement.
- File a complaint with the Federal Trade Commission at www.identitytheft.gov or 877.438.4338.
- Contact one of the three major credit bureaus to place a fraud alert on their credit records.
- Contact their financial institutions and close any accounts that have been opened without their permission or tampered with.
- Check their Social Security Administration earnings statement annually.
Taxpayers who are notified of tax return identity theft should work with the IRS to resolve the issue. The IRS does not initiate contact by email or text message, and it does not request personal or financial information. Generally, taxpayers receive notification through an official IRS letter that their identity might have been compromised. Taxpayers who are uncertain if a communication originated from the IRS should send a copy of the communication to their tax provider for verification and assistance.
A number of states also have programs to combat identity theft, and taxpayers could be required to verify their identity to receive their state refunds.