Guarding Your Refund: The Complicated World of Tax-Related Identity Theft

Tax season should be a time to reclaim some of your hard-earned money, not a source of stress and anxiety. Yet, for many taxpayers, tax-related identity theft is a very real threat. Imagine filing your return, only to find out that someone else has already cashed in your refund. 

This is a harsh reality for countless taxpayers each year. So, how can you protect yourself from this increasingly common crime? We’ve put together a comprehensive guide to help you understand the complicated world of tax-related identity theft and safeguard your financial well-being.

Understanding Taxpayer Identity Theft

Tax-related identity theft occurs when someone uses your stolen personal information, including your Social Security number, to file a fraudulent tax return and claim a refund. The first sign of trouble often comes when you attempt to e-file, only to find that a return has already been filed under your SSN. 

Alternatively, you might receive an unexpected notice from the IRS about a suspicious return. Remember, the IRS only makes contact via USPS – do not trust phone calls, emails, or other forms of communication claiming to be from an IRS official.

Recognizing the Red Flags

Stay on guard for these signs that you might be a victim of taxpayer identity theft:

• An IRS letter about a suspicious return you didn’t file.

• Inability to e-file because of a duplicate SSN.

• Unrequested tax transcripts arriving by mail.

• Notices of an online IRS account created or accessed without your knowledge.

• IRS notices about additional tax owed or refund offsets for a year you didn’t file.

• IRS records showing wages from an unfamiliar employer.

• An Employer Identification Number (EIN) assigned that you didn’t request.

Immediate Actions for Victims

If your personal information is compromised: 

Protecting Your Information

Prevention is key to preventing taxpayer identity theft. Here's how you can shield your data from illicit activity: 

What If Someone Uses Your SSN for Work?

If someone uses your SSN to earn income, you might receive a notice from the IRS about unreported earnings. In such cases, you should review your Social Security work history. 

You can access this information by creating an account. If you find errors, contact the Social Security Administration to rectify discrepancies.

The Role of the IRS and the Security Summit

The IRS collaborates with state tax agencies and the tax industry through the Security Summit to safeguard taxpayer data. In 2023 alone, the IRS flagged over one million federal tax returns for identity theft, according to a CNBC report. This led to an increase in security measures.

Recent initiatives include: 

 

Real-Life Examples

Tax-related identity theft isn't just a hypothetical problem. It's a real issue that affects thousands of people each year. Here are some real-life examples of how this crime can unfold:

The Illinois Case: An Illinois man was sentenced to 29 months in prison for using stolen identities to file false tax returns. Wilmer Alexander Garcia Meza, of Waukegan, fraudulently obtained Individual Taxpayer Identification Numbers (ITINs) from the IRS by using others' personal identifying information. From 2013 to 2017, Garcia filed tax returns using these stolen identities, claiming thousands of dollars in fraudulent refunds. He then used identification documents in those same names to cash the refund checks issued by the IRS, causing a tax loss of approximately $221,923. In addition to his prison term, Garcia was ordered to serve three years of supervised release and pay approximately $221,923 in restitution to the United States .

The Austin Indictment: In March 2024, a federal grand jury in Austin indicted seven individuals for conspiracy to commit mail and wire fraud and other crimes related to defrauding the IRS using stolen identities. From 2018 to 2021, Abraham Yusuff and his co-conspirators used stolen identities of accountants and taxpayers to file at least 371 false tax returns, claiming over $111 million in refunds. The scheme involved changing the addresses on file with the IRS to those controlled by the conspirators and using prepaid debit cards to receive the fraudulent refunds. The conspirators laundered the funds by purchasing money orders and luxury items, ultimately causing significant financial damage. If convicted, the defendants face severe penalties, including up to 20 years in prison for each count of mail and wire fraud .

It is worth noting that assistance is available if you are victimized by identity thieves. One anonymous taxpayer who, despite filing her returns properly, faced identity theft that delayed her refunds and disrupted her financial stability. With the help of the Taxpayer Advocate Service (TAS), she managed to resolve her issues and obtain necessary tax transcripts for her daughter’s college application.

Tax-related identity theft is a growing concern, but by staying informed and proactive, you can protect yourself from falling victim. Keep your personal information secure, recognize the warning signs, and act quickly if you suspect foul play. Remember, the IRS and services like TAS are there to help, ensuring that you can navigate tax season with confidence and peace of mind.

For more information and resources, visit the IRS’s Taxpayer Guide to Identity Theft or contact the tax agency directly. Stay vigilant and protect your financial future.

---