For many, January is a month of reflection: what goals do I want to accomplish in 2016? And, for some of us, will my fantasy football team selections result in the big payoff? But as the fantasy football season winds down, the IRS is suiting up to tackle a major uptick in tax return identity theft (and tax refund identity theft).
Know the Player Stats for Tax Return Identity Theft
An identity theft and tax fraud study by the Government Accountability Office (GAO) reported that:
• more than 5 million returns were filed with stolen identities, and these bogus returns requested more than $30 billion in fraudulent refunds.
• the IRS thwarted $24.2 billion of those attempted fraudulent refunds but failed to prevent $5.8 billion in actual losses.
• the IRS issued $299 billion in individual refunds, which means that approximately 2% of those refunds were fraudulent (and that percentage is expected to increase in coming years).
The Fraudsters’ Playbooks
Fraudsters electronically file returns (using stolen names and taxpayer information) claiming bogus tax credits, large fictitious withholding amounts, and fake estimated tax deposits that result in a tax refund. Then, they request that the inflated tax refunds be remitted to them before the actual taxpayer files their return. This scheme usually goes undetected until the IRS rejects the real taxpayer’s return because the IRS already has the fraudulent return filed under that social security number.
Flag on the Play
The IRS has increased manpower to tackle tax refund fraud, but horror replays of getting one’s money and identity back abound. With cutbacks in IRS staffing, wait times to speak with an agent can be two hours or more. Even when a victim speaks to an agent, there are numerous hurdles to jump through to prove that you are really “you.” Unfortunately, the entire process may take more than 18 months to correct once your identity has been stolen.
The Best Offense is a Good Defense of Tax Return Identity Theft
With recent large-scale public data breaches (including an IRS breach), criminals are gaining access to plenty of sensitive data. The IRS and security firms suggest safeguarding your Social Security number and other personal information as much as possible. Additionally, you can take some simple, defensive steps including the following:
• Check your mailbox frequently during January and February (when tax sensitive mail arrives).
• Retrieve tax information from secure, online sources.
• Don’t share personal information via phone, mail, or the internet unless you initiate contact with the source.
Your odds of wearing a tax fraud victim jersey increase the longer you wait to file your tax return. Therefore, CRI’s tax professionals advise you to go ahead and get as much tax information collected as early as possible. Certain tax records such as listings of charitable donations, medical expense summaries, rental or self-employed income, and expenses can be pulled together in advance of when tax forms (such as W-2s, 1099s, and K-1s) are sent.
Be Sure CRI is on Your Winning Roster
Above all, entrust your tax information to a reputable tax preparer. If you’re currently working with CRI, then you can take a commercial break and know that your CRI professional is taking all reasonable precautions to maintain the safety of your tax identity!