February 21, 2024


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The IRS flagged more than 1 million tax returns for potential identity theft during the 2023 tax season, according to the U.S. Treasury Department, suggesting that such fraud remains a pervasive problem for taxpayers.

Tax-related identity theft occurs when criminals use a taxpayer’s personal information to file a return in their name to claim a federal tax refund.

As of March 2, the Internal Revenue Service (IRS) has identified nearly 1.1 million tax returns that may have been fraudulent. treasury report Released to the public on Tuesday, it analyzed data midway through the filing season. The associated refunds are worth approximately $6.3 billion.

As of the same day in March, the IRS had identified 12,617 tax returns as fraudulent, the Treasury Department reported. That’s up from 9,626 tax returns for the same period in 2022.

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Nina Olson, executive director and founder of the Taxpayer Rights Center, said tax-related identity theft has been a problem since around 2004-05 and has “only gotten worse” since then.

“It went from a one-time (thief) of stealing someone’s social security number to a whole scheme and organized crime,” Olson said.

identity theft is the most common Types of fraud consumers will report to the FTC in 2022. Report The report released Wednesday by the Identity Theft Resource Center found that identity crimes are down in 2022, but only slightly from their all-time high in 2021.

Beginning with the 2022 tax season, the IRS has increased the number of filters it uses to identify potentially fraudulent tax returns. The Treasury Department said the agency used 236 filters in the most recent tax season, compared with 168 filters last year.

IRS plans $80 billion overhaul: Plan to close gap in unpaid taxes

Tax returns identified as fraudulent by these IRS filters are held in processing until the IRS can verify the taxpayer’s identity.

“They’re fighting hard … to make sure that you (that person) actually filed the paperwork,” said Dan Heron, a CPA and certified financial planner in San Luis Obispo, California.

However, sometimes the system inadvertently catches non-fraudulent returns.

One of Herron’s new clients files paper tax returns each year through a different accountant, but files electronically in 2023. The customer received an IRS notification in the mail that the return had been flagged as fraudulent. Customers had to contact the agency to verify their identity — delaying the issuance of tax refunds by weeks, Herron said.

“It’s not a perfect system, but it’s moving in the right direction,” said Herron, founder of Elemental Wealth Advisors, of the IRS system.

How to protect yourself from tax-related identity theft

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Taxpayers may not know they are victims of tax-related identity theft until they try to file a return online and learn that it has been filed using their Social Security number. The IRS may also send a letter saying it found a suspicious return using your SSN, for example, other signs.

If this happens, taxpayers can still claim their refund. But they must take extra steps to prove their identity to the IRS, so their refunds may be delayed.

Perhaps the best way for taxpayers to prevent identity theft is to ask Identity Protection PIN (IP PIN) directly from the IRS, Olson said.

An IP PIN is a six-digit number assigned to eligible taxpayers at the start of each filing season. It is known only to taxpayers and, once issued, is required as an identity verification measure when filing tax returns.

Tax returns filed by scammers will not be processed without the associated IP PIN, Olson said. She advises taxpayers who want an IP PIN to apply for one in the second half of the calendar year, before tax season, and keep it handy.

As of March 4, the IRS issued a total of 802,449 IP PINs to taxpayers, according to the Treasury Department report.

Taxpayers can also reduce risk by trying to file their returns earlier in the tax season, experts say.The IRS also recommends Multiple Online Security Measures Tie to computers and phones, digital passwords, multi-factor authentication, and avoid suspicious email links or attachments.

The IRS also never unsolicitedly contacts taxpayers via email, text message or social media to request personal or financial information, or calls to threaten prosecution or arrest, the agency said.

What to do if you are a victim of tax file number theft

IRS recommend Victims of tax-related identity theft take several important steps:

  • complete irs Form 14039, Identity Theft Affidavit, if your electronic file return was denied due to a duplicate submission using your social security number. Continue to pay your taxes and file your tax returns, even if you have to do it on paper. Attach the identity theft form to your paper return.
  • Respond immediately to any IRS notice.
  • File a complaint with the FTC identity theft site.
  • Contact one of the big three credit bureaus (Equifax, Experian, or TransUnion) to place a fraud alert on your credit history.
  • Close any financial or credit accounts opened by the thief.