Identity Theft and Your Taxes

Identity Theft and Your Taxes

January 01, 2023

If it hasn't happened to you yet, you probably know someone that has had their identity stolen. Identity theft is one of the fastest growing crimes in the United States. Illinois has been hit with a rash of Unemployment scams. Identity theft is a type of fraud in which a thief uses your personal information to conduct transactions in your name. Criminals may, for example, use your identity to open or empty bank accounts, obtain credit cards, or take out loans. In addition to fraud directly concerning your finances, thieves can also use your information to commit crimes that may affect your taxes.

Types of Tax Fraud

With your identifying information, an undocumented worker or another individual may use your Social Security number on job applications and employment paperwork. The employer would then report the thief’s W-2 wages earned to the IRS using your information. As a result, when you file your tax return, it will appear to the IRS that you did not report all of your income.

An identity thief may also file a tax return using your name and Social Security number in order to obtain a refund. When you later file your return, the IRS might believe that you already filed and received a refund; therefore, the return you submitted would be considered a second copy or duplicate.

Protecting Yourself

Before you become a victim of identity theft, consider these steps to help protect yourself.

  • If you must give out personal information, be aware of your surroundings and do it discreetly.
  • Do not give out personal details over the phone unless you have made the call yourself.
  • Properly destroy any documents, receipts, or pieces of mail that contain information an identity thief might find useful, including your bank account information, Social Security number, address, and birth date.
  • Avoid using your Social Security number as part of a password or pin number, or on your driver’s license, unless absolutely necessary.
  • Secure your personal computer using firewall programs, antivirus software, and secure browsers before revealing personal information online.

If you receive a notice from the IRS that leads you to believe that your personal information has been used to commit tax fraud, contact the IRS by phone or in writing as directed in the notice. Possible triggers indicating you may have been the victim of identity theft include statements that you received wages from an employer unknown to you or that more than one tax return was filed in your name. IRS tax examiners can work with you and other agencies, such as the Social Security Administration, to resolve these discrepancies. It is important to note that the IRS will not initiate a request by e-mail for taxpayer information in this, or any other, situation. If you do receive such a request, it may be an attempt by identity thieves to obtain your tax information.

In addition to other precautions you may take to protect your identity from thieves, the IRS recommends that you be extremely careful when choosing someone to assist you with tax preparation. Because this person will have access to your personal financial records, be sure to research his or her credentials and experience. Avoid preparers who guarantee results, base fees on a percentage of the amount of refund, or claim they obtain larger refunds than other preparers.

Identity theft can be a financially and emotionally devastating ordeal. For more information about identity theft and what to do if you become a victim, visit the FTC’s website, www.ftc.gov.

This commentary was created by and shared with permission from FMeX for informational purposes only. The views expressed are those of the author. This reprint should not be construed as an offer to sell or a solicitation of an offer to buy any product. Aspire Planning Group, LLC (Aspire), cannot guarantee the accuracy or completeness of statements or data herein. The commentary does not take into account any investor’s particular investment objectives, strategies, tax status, or time horizon. There are no assurances that the techniques and strategies discussed are suitable for all investors or that the predicted results will occur. The commentary does not constitute investment advice, tax advice, or legal advice. All investments are subject to risk, and past performance is no guarantee of future results.
Investment advice offered through Vertex Planning Partners, LLC, a registered investment advisors. Aspire Planning Group LLC is a d/b/a of Vertex Planning Partners, LLC.