Identity theft, especially tax identity theft is on the rise. In fiscal year 2013, the IRS initiated 1,492 identity theft related criminal investigations. According to the IRS, this was a 66% increase over investigations initiated in fiscal year 2012. Indictments and sentencing doubled in FY 2013. For the period from January 1 through April 10, 2014, 295 investigations were initiated and the IRS has assigned more than 3,000 agents to work on identity theft-related issues, (IRS Fact Sheet 2014-1). Per the IRS, their office has stopped 14.6 million suspicious returns from being processed and protected over $50 billion in fraudulent refunds from 2011 through November 2013.

Unfortunately, once personal information is stolen, there is no telling what can happen. Erroneous tax returns claiming fraudulent deductions or additional dependents may be filed in an attempt to get large refunds. The information can be used to obtain fraudulent employment. The thief gets the paycheck and you get the W-2.

Signs that your tax identity has been stolen:

  • Your return is rejected when you try to file it because there’s a return already on file.
  • You might get a notice from the IRS stating that you have underreported your income.
  • The IRS may disallow an exemption for your dependent child because someone else has claimed the exemption.
  • Your state or federal benefits might be reduced or cancelled because the agency received information reporting an income change.

Fortunately there are agencies and procedures to lead you through the hassle you face as you reclaim your identity. However, the process can take up to a year for tax related identity theft to be resolved.

For more information, visit the following websites:

By Lori Helmantoler, CPA, MST, lhelmantoler@legacycpas.com