Data Facts Lending Solutions Blog

Tax Identity Theft- How it Happens, and How to Prevent It

by Matt Holmes

Jan 20, 2020 9:02:00 AM

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“Identity theft is not a joke, Jim!” This was Dwight’s reaction as Jim arrived at work donning his trademark glasses and dress shirt on NBC’s The Office. To the mortgage lending community, Identity theft is, in fact, not a joke. And the realities of it can be a quite a bit more sinister than a prank played between two coworkers. So it’s no surprise the Federal Trade Commission has declared next Monday as the beginning of Tax Identity Theft Awareness Week.

What is Tax Identity Theft?

Tax Identity Theft occurs when a scammer uses your Social Security number to file a fake tax return, and claim your refund as their own. It’s difficult to detect this type of fraud before it occurs, but here’s how you can tell if you’ve been a victim:

  • If someone has already filed a tax return using your SSN, they’ll be sent your refund. When you file a return yourself, you’ll receive a notice in the mail from the IRS stating that your refund has already been sent.
  • When a thief uses your SSN to gain employment, that employer will report those earnings to the IRS. Of course, when you file your tax return, you won’t include the scammer’s earnings, so the IRS will send you a letter stating you haven’t declared all income.
  • If your earnings don’t reach a certain threshold, you won’t be required to file a tax return. If this is the case, and someone uses your SSN to obtain employment but forgets to file taxes, you could be the one receiving a collections notice from the IRS in the mail.

If you receive any of these notices, make sure to contact the IRS immediately. And remember, The IRS Identity Theft Protection Specialized Unit can be reached at 1-800-908-4490.

Mortgage Fraud in America is more sophisticated than ever before. Check out this infographic on the state of mortgage fraud in the United States.

How can I avoid Tax Identity Theft?

Unfortunately, no one is completely immune to the dangers of tax identity theft. However, there are steps you can take to significantly reduce the chances it’ll happen to you. Here are some ways you can protect yourself:

  • Don’t wait to file your taxes this year. The longer you wait, the more opportunity scam artists have to file ahead of you.
  • Check your credit report for suspicious-looking activity. Unfamiliar trade lines are a red flag that your information has been compromised.
  • Don’t give out your personal information through unsolicited calls, emails or texts. Be mindful of suspicious messages that request immediate action, and remember- the IRS will never contact you by phone, email, or text.
  • Change your passwords regularly, and make sure you’re using separate passwords for your accounts. If your online accounts offer dual authentication methods, take advantage of them.

Tax season may just be getting started, but the reality is, tax scammers have been hard at work. Protect yourself by expecting the unexpected.

Sources:

  • https://www.consumer.ftc.gov/features/tax-identity-theft-awareness
  • https://www.fraud.org/tax_id_theft
  • “Product Recall.” The Office, season 3, episode 21, NBC, 26 Apr. 2007. Netflix, www.netflix.com

Topics: mortgage fraud, tax return verifications

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