Identity Theft & Fraudulent Tax Returns

The IRS increased its attempts to curb refund fraud including identity theft. For the years 2011 through November 2013, the IRS has blocked 14.6 million suspect returns, and safeguarded over $50 billion in fraudulent refunds. The average sentence for tax fraud was 38 months and the longest sentence was 26 years. ( 2014).

The growing number of fraudulent tax returns goes hand in hand with the increase in all types of fraud in the US. As with any type of identity theft, most are unaware of the crime until long after it occurs. How can any taxpayer or business know if a fraudulent return was filed? There are red flags of fraudulent returns that you should be aware of.

• Income that was not proportionate to expenses.

• Concealment of assets

• Standard of living exceeds reported income.

• There are two sets of books and records

• Destruction of books and records-these records cannot be located or produced when requested

• Fictitious or misrepresented entries in books and records

• Fictitious invoices or billings

• Photocopies of invoices

• Disproportionate billing discounts

• If you have been a victim of identity theft you can apply for a federal PIN from the IRS. If you haven’t been a victim you can still obtain a PIN.

• The IRS doesn’t send email. Any message is probably fraudulent, and you should not reveal any information in response.

• Refuse to provide your Social Security number unless it is a requirement

• Shred documents with any personal information before disposing of them

• Store all sensitive documents, like tax returns, in a locked file.

• Keep your computer’s anti-malware and virus programs up to date.

• Never send any type of personal information over a public Wi-Fi, such as the kind in a café or hotel lobby.

• A rejected tax return notice from the IRS stating that the social security number has already been used is a potential sign that a fraudulent return has been filed.

• An IRS notice that income was not reported for an employer you do not know is another ploy of fraudsters.

• A business that receives a notice from the IRS about employees it does not have could be a sign of fraud.

What can you do if you are a victim of identity theft?

1. File a report with the local police.

2. Report identity theft to the FTC at or by phone at 1-877-438-4338, TTY 1-866-653-6261.

3. Contact the credit bureaus to place a fraud alert on your credit report:

Equifax report online or 1-800-525-6285

Experian report online or 1-888-397-3742

Transunion report online or 1-800-680-7289

4. Close any accounts opened fraudulently.

5. File form 14039, Identity Theft Affidavit with the IRS. This allows the taxpayer to put an indicator on their tax records for questionable activity.

These measures do not guarantee that you won’t be a victim of identity theft or fraudulent tax return, but education is the best form of prevention. Help eliminate fraud by following the ideas set forth above.