Watch Out for Tax Return Identify Theft

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I had a surprise this past week when I tried to efile an extension for one of my clients. It rejected. That, in and of itself, isn’t that surprising, rejects happen. But the reason for this one was unusual.

The IRS said someone had already filed a return and claimed the refund. I called my client, making sure they hadn’t filed a return and forgotten to tell me. No, they hadn’t and they started looking around. To their knowledge, there is no one who should know their social security numbers, have copies of their W-2s or have any inside information that would let them file for a refund with their information.
The fix for now was to paper file an extension and get the tax return prepared as soon as possible. We’ll go through the “special cases” unit of the IRS to get it filed. It will undoubtedly delay their refund, but they should eventually get it.

I had heard a little about this problem, but had no idea how widespread it was. In Memphis, a woman stole records from the Memphis Police Department that included names, addresses, social security numbers and employers. She then sold those records to other who electronically filed tax returns. She was sentenced to 21 years in the federal pen. There was another case in Chicago of a man who used the name of over 400 dead taxpayers to efile returns and claiming $120 million in refunds.

If you get an email from someone claiming to be from the IRS, do not answer! The IRS does not email taxpayers. That’s another common way that bad guys get hold of your information.

If you are the victim of an IRS identity theft, report it to the IRS and file a complaint with the Federal Trade Commission through their Complaint Assistant.

Identity theft is a lot more widespread than you might think. If someone grabs your tax refund, take action right away.

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