A publication of the Kentucky Center for Public Service Journalism

BBB Trends: Tax Identity Theft is a reality — IRS identified over 42k-plus fraudulent refunds last year

Did someone misuse your Social Security number (SSN) to file for a tax refund or get a job? Did a stranger claim your child as a dependent? Did the IRS contact you about unreported income from the second job you don’t actually have?

These are all signs of tax identity theft and it is a perpetual problem not just for consumers, but also for the Internal Revenue Service. According to Forbes, the IRS identified 42,148 falsified tax returns with $227 million claimed in fraudulent refunds last year.

January 30 to February 4 is Tax Identity Theft Awareness Week, an event to help educate consumers about how to recognize the signs of tax identity theft. When a scammer files a fraudulent tax return using someone else’s SSN to steal their refund, this constitutes tax ID theft. This can happen in a business environment as well. A scam artist uses another person’s Social Security number to earn wages that are then reported as the victim’s income – this is known as employment-related tax identity theft.

Employers are required to report an employee’s income to the IRS, so in situations of employment-related tax ID theft, a scam artist uses someone’s SSN to get a job. That income data is then passed on, but it is attached to the Social Security number, not a name. When the person whose SSN was used files a tax return, the IRS records show that they failed to report all of their income. The agency then audits the victim’s tax reports and sends a notice stating that they earned wages but didn’t report them, so they owe money.

Unfortunately, tax identity fraud is difficult to detect until a tax return is filed. The best way to prevent it from happening is to file electronically as soon as you receive all of your tax documents. If you receive a letter by mail indicating a problem, contact the IRS immediately. It’s important to note that the IRS doesn’t contact anyone via phone or email. Anyone who claims to be with the IRS and asks for payment immediately is a fraud. Specialists will work with you to file the return correctly, ensure that you receive the refund you’re due, and protect your IRS account from identity thieves in the future.

It’s important to take action immediately once your identity has been compromised. Other than reporting the issue to the IRS, people affected by this scam should place fraud alerts on credit cards and bank accounts; request credit reports to see if there are any unknown transactions, and create identity theft reports with the Federal Trade Commission. Once those steps have been completed, they should begin to develop a recovery plan using the information available on identitytheft.gov.

Sandra Guile is the Community Outreach Specialist for BBB. She promotes BBB’s message of marketplace ethics through public speaking engagements, presentations, media relations, press releases, web content, and other written materials. Contact Sandra at (513) 639-9126 or sguile@cincinnati.bbb.org. Your BBB is located at 1 East 4th Street Suite 600 Cincinnati, Ohio 45202 – to reach the office, call (513) 421-3015.

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