Tax Law Blog
Now is the time of year when people start to receive W-2s from their employers and start to think about filing individual tax returns. Many people, however, wait until the last day to file their individual tax return. Some people have very good reasons to wait, while others may just have a habit of procrastination.
There is at least one good reason to file your individual tax return well before April 15. The Internal Revenue Service has recently released information regarding tax-related identity fraud. Identity thieves can steal your personal information and use it for their gain. Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.
This threat is real. I speak from personal experience.
Last April, right before I was about to go on vacation with my family, I attempted to e-file my individual tax return. After I submitted my return, I started packing for the vacation that I was leaving for the next day. Late in the evening on a Saturday night, I received a call from my accountant telling me that my tax return was rejected by the IRS. Someone had previously filed a return claiming me as a dependent. The accountant immediately suspected identity theft. I was preparing for a vacation and did not have time to handle all of the issues that would arise. Because of my experience, I am preparing a checklist to follow if you are a victim of identity theft – look for an upcoming article on this blog for that information.
Identity thieves know that many people procrastinate filing a return, so they will rush to file a fraudulent return in February or March. Once a social security number is used to file a return or is claimed as a dependent on a return, then all subsequent returns using that social security will be rejected. If an identify thief uses your social security number to claim you as a dependent before you file your return, the fraudulent return will be honored and your return will be rejected. This is particularly troublesome since the IRS has made a concerted effort to issue refunds immediately, prior to verifying the information in returns, so taxpayers can access their money sooner. Returns (and refunds) are verified months later, well after the fraud has occurred. This practice has allowed fraudsters to prey on individuals who wait to file returns.
Identity theft is a real problem in our society. Millions of people have been victims of tax-related identity theft. One simple way to avoid this particular problem is to file your tax return early – before someone else can claim you as a dependent.
The IRS offers the following tips as ways to protect you from becoming a victim of identity theft:
- Don’t carry your Social Security card or any documents that include your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN).
- Don’t give a business your SSN or ITIN just because they ask. Give it only when required.
- Protect your financial information.
- Check your credit report every 12 months.
- Review your Social Security Administration earnings statement annually.
- Secure personal information in your home.
- Protect your personal computers by using firewalls and anti-spam/virus software, updating security patches and changing passwords for Internet accounts.
- Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.
If you would like more information, do not hesitate to contact a Foster Swift attorney.
