Tax Fraud

Tax Fraud

Identity theft tax fraud occurs when a criminal uses a victim’s identifying information to mislead an employer or tax authorities in some way, such as filing a false tax return or using another person’s identity to secure employment.

Typically, victims of this type of fraud don’t immediately realize that they have been targeted. A victim often does not realize what has happened until he or she tries to file a legitimate tax return and finds that the IRS) has rejected it because another one has already been filed under the same name and Social Security number.

Identity theft tax fraud is a growing problem in the United States. According to a 2013 report from the IRS, there are more than 3,000 IRS employees currently working on identity theft cases. This number is more than twice the number of employees who were assigned to handle identity theft tax scams a year ago.

And according to the U.S. Treasury Inspector General for Tax Administration, the IRS paid a whopping $5 billion in fraudulent tax refunds last year.

Tax fraud warning signs

According to the IRS, the sooner a victim can take action, the better. In order to protect your finances and identity, make sure you are familiar with the following warning signs that indicate you could possibly be the victim of a scam:

  • You are unable to file your tax return; the IRS reports that you have already filed a return for that year.
  • You receive unexpected employment forms from an employer you have never worked for.
  • The IRS reports that you have earned more money than you actually made that year.
  • The IRS reports that they received an income change notice from you, even though you never sent one.
  • You suddenly lose certain government benefits, such as unemployment or disability entitlements.

What to do if you suspect fraud

So what should you do if you suspect you may be a victim of tax fraud?

The first thing to do is contact the IRS as soon as possible. The sooner that you can address the problem, the less of a hassle it will be down the road. If you determine that you have been a victim of identity theft (or if you strongly suspect you are a victim), you should also file a police report. This will provide helpful documentation that you may need later on.

You should then put a credit freeze or fraud alert on your accounts. If an identity thief already has already stolen your information through a data breach, he or she could also use it to obtain credit in your name. Sometimes identity thieves will use your information just to obtain a tax refund, but you cannot be sure. It is better to take preventative measures now than to deal with a more serious situation later.