June 10, 2016 11:59 am

Tax-Related Identity Theft: What to Do About It

Tax-related identity theft results when someone uses your Social Security number to file a tax return and obtain bogus refunds. When a return is filed under your name, the processing of your return is delayed, even though yours is legitimate, and if you are due a refund, the refund is greatly postponed. Understand what you can do to prevent being a victim of tax-related identity theft, and what to do if you should become a victim.

1. Preventing identity theft

While there’s no absolute protection against identity theft, there are measure you can take to minimize the changes that you’ll be victimized.

  • Use common sense strategies for protecting personal information. Don’t carry your Social Security card with you. Protect online data with smart password and other protections.
  • Understand which IRS contacts are real and which are not. The IRS does not initiate contact with a taxpayer by telephone or by email, and does not ask for immediate tax payments with threats of dire consequences for nonpayment. If you receive a notice in the mail from the IRS, there should be a toll-free number that you can call to learn more.

2. Recognizing potential identity theft

There are some clear indications that you’ve become the victim of tax identity theft:

  • More than one tax return has been filed using your Social Security number.
  • The IRS tells you that you owe additional tax even though you know you don’t.
  • Your anticipated tax refund has been offset by some outstanding liabilities you are unaware of.
  • The IRS has taken collection actions against you for a year you did not file a tax return.
  • IRS records indicate you received wages or other income from an employer for whom you did not work.

If you think or you know you’ve been the victim of identity theft, even if your tax account has not been compromised, you should take action. Report your concerns to the IRS. You may be issued a special tax identification numbercalled an Identity Protection Personal Identification Number (IP PIN)which is a special six-digit number that you use for the tax year for which the IP PIN is designated. An IP PIN is used if any of the following apply to you:

  • You know you’ve been victimized, your tax account has been placed on an identity theft indicator, and you received CP01A Notice from the IRS; this notice has the IP PIN.
  • You filed your prior year’s return as a resident of Florida, Georgia, or the District of Columbia. These are areas in which there is considerable identity theft.
  • You received a letter from the IRS inviting you to “opt in” for an IP PIN.

3. What to do if you are victimized

If you are a victim of tax-related identity theft, you must take actionwith the IRS and with others.

With the IRS:

  • If the IRS informs you that someone has used your Social Security number, respond to the notice you received. Call the telephone number on the notice or go to https://idverify.irs.gov/IE/e-authenticate/welcome.do and follow the steps on the IRS Identity Verification Service.
  • If your e-filed return has been rejected because a return has already been filed under your Social Security number, complete Form 14039, Identity Theft Affidavit. Attach this to a printed copy of your return and mail it to the IRS.

With others:

  • File a complaint with the Federal Trade Commission (FTC) at www.identitytheft.gov.
  • Report ID theft to your local police. Usually you need a police report to take certain actions with credit bureaus (below).
  • Inform all of the consumer credit bureaus (Equifax at www.equifax.com; Experian at www.experian.com; and TransUnion at www.transunion.com)
  • Notify your financial institutions (banks, brokerage firms)


Last year, the IRS’s computer filters detected about 3 million suspicious returns, flagging them for further review. Many of these suspicious returns related to identity theft. Almost 2,000 people have been convicted of tax refund fraud related to identity theft. You can’t be complacent and ignore the risk; the numbers are just too big. Be proactive in protecting yourself, and take immediate action if you are victimized.

Tax Glossary

Tax attributes

When debts are cancelled in bankruptcy cases, the cancelled amount is excluded from gross income. Tax attributes are certain losses, credits, and property basis that must be reduced to the extent of the exclusion.

More terms