FAQ: Does tax return identity theft spike at the start of the filing season?

Yes. Identity theft is a growing problem and the start of the return filing season is one of the peak times for identity thieves filing fraudulent returns. Criminals file false returns early to get refunds and unsuspecting taxpayers are unaware their identities have been stolen until they file their returns. Individuals who believe they have been victims of identity theft should immediately alert their tax professional and the IRS. The IRS has a number of programs in place to assist victims of identity theft.

Identity theft

Identity theft has been the number one consumer complaint to the Federal Tax Commission for 13 consecutive years, and tax identity theft has been an increasing share of the FTC's identity theft complaints. In 2010, tax identity theft accounted for 15 percent of the FTC's identity theft complaints from consumers, while in 2011 it made up 24 percent of the overall identity theft complaints. In 2012, tax identity theft accounted for more than 43 percent of the identity theft complaints, making it the largest category of identity theft complaints. The IRS has reported similar growth in this troubling problem.

Identity theft occurs when a criminal uses the personal information of another to commit fraud or other crimes. Personal information includes an individual's name, date of birth, Social Security number, bank account numbers, credit card numbers, personal identification numbers, and other identifying information.

In tax identity theft, a criminal typically uses a taxpayer's identity to fraudulently file a tax return and claim a refund. The identity thief has obtained the taxpayer's Social Security Number and other personal information. As mentioned, identity thieves attempt to get a refund early in the filing season. The taxpayer discovers that a false return has been filed when he or she files a genuine return.

IRS actions

The IRS has set up a special Identity Theft Protection Specialized Unit. These employees are the first responders in assisting taxpayers whose identities have been stolen. The IRS will take a report, and request that the victim complete a special form (IRS ID Theft Affidavit Form 14039). This special form requires the taxpayer to briefly describe the events giving rise to the identity theft. The taxpayer also must provide proof of his or her identity by submitting photocopies of identifying documents, such as a passport, driver's license or other valid federal or state government-issued identification.

The IRS is assigning special identity protection personal identification numbers (IP PINs) to victims of identity theft to use when filing their returns. An IP PIN is a unique six-digit number and is assigned annually to victims of identity theft. During the 2014 filing season, the IRS reported that it expects to provide more than 1.2 million identity theft victims with an IP PIN, up from more than 770,000 in 2013.

Additionally, the IRS has overhauled its identity theft screening filters to spot suspected fraudulent returns before they are processed. After a suspected fraudulent return is flagged, the IRS will hold the return for further processing until the agency verifies it is a true return. If you receive a notice from the IRS, please contact our office immediately.

If you have any questions about protecting yourself from identity theft or the IRS's activities to curb tax return identity theft, please contact our office.