Tax Identity Theft: How It Happens and How to Stay Safe

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Tax identity theft is a serious issue that affects millions of people each year. In 2020 alone, the Federal Trade Commission (FTC) reported over 89,000 cases of tax identity theft in the United States. Thieves use stolen personal information, such as Social Security numbers, to file fraudulent tax returns in someone else’s name and claim refunds. This can result in delayed refunds, penalties, and other financial headaches for the victim.

Tax Identity Theft: How It Happens and How to Stay Safe

How Tax Identity Theft Happens

Tax identity thieves often obtain personal information through various means:

Phishing Scams

Criminals may send emails or create fake websites tricking individuals into sharing their sensitive data. For instance, in 2019, a phishing scam disguised as a tax preparation company tricked over 100,000 people into providing their Social Security numbers and other personal information.

Data Breaches

Hackers break into databases where our personal data is stored (e.g., credit bureaus), steal it and sell it to third parties who perpetrate tax fraud. For example, the Equifax data breach in 2017 exposed the personal information of 147 million people, making them potential victims of tax identity theft.

Stealing Mail

Criminals can steal important documents like W2 forms from your mailbox. In a case reported in New Jersey in 2020, a group of thieves stole mail from over 1,000 mailboxes, including tax documents, to commit tax identity theft.

Once they have your information, criminals file fake tax returns claiming large refunds before you even get the chance to submit yours. In 2019, the IRS identified $2.3 billion in tax fraud schemes, including tax identity theft.

Signs of Tax Identity Theft

It’s important to be aware of any suspicious activity on your tax return. Some signs that could indicate identity theft are:

  • IRS notice regarding duplicate filings: The IRS will never send an email asking for personal information. If you receive an email claiming to be from the IRS, it’s likely a scam.
  • Unexpectedly receiving intimate communication with regard to a filed return which wasn’t expected yet.
  • Refund delays beyond normal timeframe: The average refund time is 21 days. If it takes longer, it could be a sign of identity theft.

If you experience these problems, immediately assume that there might be an issue with your taxes identify theft occurred.

Staying Safe from Tax Identity Theft

Here are some steps you can take to minimize the risk of being affected by tax identity theft:

Protect Your Social Security Number

Keep this number safe; do not carry it in your wallet or leave copies lying around at home casually. In 2019, the Social Security Administration reported that Social Security number misuse was the most common type of identity theft.

Be Careful Online

Do not click on links within emails or texts received unexpectedly containing attachments or ask for sensitive details about yourself or others. According to the FBI, phishing was the most common type of cybercrime in 2020.

File Earlier During the Filing Season

File early even before scammers have a chance to file a fake return in your name. The IRS begins accepting tax returns in late January. Filing early can help prevent tax identity theft.

Use Multi-Factor Authentication for Online Tax Filing

Add extra layers of protection such as fingerprint, which may take just another few seconds but can make a big difference in protecting you from fraud. The IRS recommends using multi-factor authentication whenever possible.

Monitor Bank Accounts and Credit Reports Frequently

Always review bills, statements and financial reports thoroughly to spot any inconsistencies or unexpected charges or withdrawals. The FTC recommends checking your credit reports at least once a year.

By taking these steps, you can help protect yourself against tax identity theft and ensure that your tax season runs smoothly. Remember always be alert because the threat is real!


What is tax identity theft, and how does it happen?

Tax identity theft occurs when fraudsters use stolen personal information to file fraudulent tax returns in someone else’s name. They may steal Social Security numbers or other identifying information through various means, such as phishing scams or malware attacks on computers. Once they have this information, they create a fake tax return and file it with the IRS to claim refunds.

How can I protect myself from tax identity theft?

There are several steps you can take to stay safe from tax identity theft:

  • Protect your personal information by keeping sensitive documents like your Social Security card in a secure location.
  • Be wary of unsolicited emails or phone calls asking for personal information.
  • Use strong passwords for online accounts and avoid using public Wi-Fi networks for sensitive transactions.
  • Monitor your credit report regularly to check for any suspicious activity or unauthorized accounts that may be opened under your name.

What should I do if I suspect that I am a victim of tax identity theft?

If you suspect that someone has filed a fraudulent tax return in your name, take immediate action:

  • Contact the IRS Identity Protection Specialized Unit (IPSU) at 1-800-908-4490 to report the issue.
  • File an Identity Theft Affidavit (Form 14039) with the IRS.
  • Place a fraud alert and/or credit freeze on your credit reports to prevent any further unauthorized activity on your accounts.