Tax Filing Fraud: The Newest Form of Identity Theft

Today, a taxpayer’s worst nightmare is hearing from their CPA: “We can’t “e-file” your return. There’s an e-file error which indicates a return is already on file with the IRS using your Social Security Number.” The Internal Revenue Service (IRS) paid out nearly $5.2 billion dollars in bogus refunds to identity thieves for the tax year 2013 and it is estimated by the end of 2016 the number will hit $21 billion. According to the Government Accountability Office, (GAO), the real figure is probably significantly higher because it is difficult for the IRS to detect all income tax frauds. Thieves are able to file returns using counterfeit or fraudulent W2s because W2s are not required to be filed with the Social Security Administration until February 29th and in turn, the Social Security Administration does not send the W2s to the IRS until July. This lag in reporting allows a “Perfect Storm” for identity thieves to file fraudulent returns undetected. In response to this growing problem, there are new regulations requiring W2s to be filed with The Social Security Administration on January 31, 2017; however, there is still a delay in SSA forwarding the W2s to the IRS for use in matching data with returns as they are filed. According to IRS publication 5027, if you become a victim of tax return identity theft you should:

  • File a complaint with prosecuting attorney or your local law enforcement
  • Contact one of the three major credit bureaus to place a “fraud alert” on your credit records
  • Contact your financial institution and close any financial or credit accounts opened without your permission or tampered with by identity thieves
  • Complete and file IRS Form: 14039, Identity Theft Affidavit

Remember, the IRS does not initiate contact with taxpayers by telephone or electronic means to request personal or financial information. This includes any type of electronic communication such as emails, text messages, and social media channels. The IRS is reporting a 400% increase in these types of scams from 2015. Report suspicious online or emailed phishing scams to or call 800-366-4484.

A common scam is for criminals to call and impersonate a US Treasury official and threaten jail time, liens, or a visit from the sheriff if you do not immediately provide them with payment for overdue tax liabilities. This scare tactic has proven effective in separating people from their money, and there is no way to recover the stolen funds. The fraudsters are so sophisticated they can make your caller ID display the IRS as No initial verification of information will ever be done over the phone with an IRS employee. Always use caution in providing personal information over the phone to strangers, no matter how legitimate they sound.

The IRS has resources to help if you are a victim of identity theft. Publication 4524 Taxes. Security. Together. lays out steps you can take to help protect yourself from identity theft and phishing scams.