5 Red Flags of Tax Identity Theft

by | Mar 29, 2024

Tax season – a time for potential refunds, but also a prime target for criminals. They see an opportunity to exploit the flurry of tax filings by stealing your Social Security number (SSN) and filing a fraudulent return to claim your hard-earned refund. The worst part? You might not even realize you’ve been a victim until you try to file your own return and it gets rejected.

Don’t let tax season become a nightmare of identity theft! Here’s a deep dive into the five major red flags that could signal this crime, along with insightful tips on how to fight back and protect yourself.

Red Flag #1: The Dreaded Rejection – Your E-Filed Return Gets Bounced

This is a major red flag. If you electronically file your return and the IRS rejects it because a return with your SSN has already been submitted, it’s a strong sign of tax identity theft. The IRS will typically send you a notification explaining the rejection. Don’t ignore this! Here’s how to fight back:

  • Contact the IRS Immediately: Call the IRS Identity Theft Specialist Unit at 1-800-909-4498. Be prepared for wait times, but persistence is key. Explain the situation and request a report they can use to verify your filing and potentially prevent fraudulent refunds.
  • File a Paper Return with Form 14039: While you can’t e-file anymore, you can still file a paper return with a special form – the Identity Theft Affidavit (Form 14039). This form officially notifies the IRS of the suspected theft and helps them investigate further.
  • Gather Proof of Identity and Income: The IRS might request additional documentation to verify your identity and income. This could include W-2s, 1099s, paystubs, and proof of your SSN (e.g., Social Security card or W-2 from a previous year).

Red Flag #2: Surprise! Unexpected IRS Notices in Your Mailbox

Receiving IRS notices you don’t remember prompting is a major red flag. Here’s what to watch out for:

  • Notice of a Balance Due or Refund Received: If you haven’t filed a return yet, but receive a notice about a tax balance due or a refund you weren’t expecting, be suspicious.
  • IRS Verification Letters (CP2000, etc.): These letters typically ask for additional information about your return. If you receive one and haven’t filed, it’s a red flag.
  • Notice of Online IRS Account Creation: If you get notified about an IRS online account being created in your name that you didn’t set up, take immediate action. Criminals might use such accounts to access your tax information or file fraudulent returns.

How to Fight Back:

  • Don’t Respond to the Notice Directly: These notices might contain instructions to “verify” your identity online, which could be a phishing scam.
  • Contact the IRS Directly: Call the IRS Identity Theft Specialist Unit and explain the situation.
  • Follow Up in Writing: While you call, also send a copy of the suspicious notice and a written explanation to the IRS Identity Theft department for documentation purposes.

Red Flag #3: Wage Garnishment or Offset Out of the Blue

If you receive unexpected notices about wage garnishments or offsets to repay tax debts you don’t recognize, it could be a sign your identity has been stolen and used to file a fraudulent return.

How to Fight Back:

  • Contact Your Employer Immediately: Explain the situation and request them to stop any wage garnishments until the issue is resolved with the IRS.
  • Resolve the Issue with the IRS: Again, call the IRS Identity Theft Specialist Unit and explain the situation. They can put a freeze on your account to prevent further fraudulent activity.

Red Flag #4: Tax Transcripts You Never Requested

The IRS provides tax transcripts that summarize your tax filing history. If you receive transcripts you never requested, especially ones showing income you didn’t earn, it’s a potential red flag of tax identity theft.

How to Fight Back:

  • Contact the IRS: Call the Identity Theft Specialist Unit and report the suspicious transcripts.
  • Request New Transcripts: Once the issue is resolved, request new transcripts to ensure they accurately reflect your tax history.

Red Flag #5: Dealing with the IRS Feels Like an Uphill Battle

Reaching the IRS by phone can be frustrating, especially during peak season. However, if you’re trying to resolve a tax issue related to suspected identity theft and experience long hold times or difficulty reaching someone, it can be even more exasperating.

Don’t Give Up! Here are some strategies to navigate a potentially frustrating situation:

  • Be Persistent: While long hold times are common, don’t give up easily. Early mornings and evenings might have shorter wait times.
  • Gather Documentation: Having all your paperwork readily available – proof of identity, income documents, copies of suspicious notices – will help expedite the process when you finally reach an agent.
  • Consider Getting Help: If dealing with the IRS on your own feels overwhelming, consider seeking help from a tax professional or legal aid organization specializing in identity theft issues. They can assist with communication and ensure your rights are protected.

By staying informed, taking these precautions, and acting swiftly if you suspect identity theft, you can significantly reduce your risk of becoming a victim. Need help? Talk to us today!