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What Every Taxpayer Should Know About Identity Theft

Think your identity is safe from hackers? Think again, especially if you live in South Carolina. A hacker struck the South Carolina Department of Revenue in October of 2012, stealing 3.6 million Social Security numbers and data from 387,000 credit and debit card accounts. Even worse, it was the third successful attack in just two months. South Carolina is providing those affected with one year of free credit monitoring, but that’s a small comfort when hackers have your vital information.

That’s not the only way you could be vulnerable. Recently, the email account of one of our clients was hacked. The hacker made several attempts to obtain the client’s other passwords and access her financial accounts. Her BWFA advisor suspected that something was wrong when he received an email purporting to be from the client, asking to move money to a new account. He contacted the client by phone and spoke with her directly to confirm she had not authorized the transfer. Until that call from her BWFA advisor, our client had no idea she’d been the victim of identity theft.

Identity theft occurs when someone uses another’s personal information without their permission to commit fraud or other crimes using the victim’s name, Social Security number, or other identifying information. Since 2000, there has been an 81% increase in identity theft complaints in the U.S. Approximately 15 million U.S. residents have their identities used fraudulently each year, and financial losses have been estimated at nearly $50 billion.

Tax returns are a very common way that ID thieves will attack. The problem might start outside of the tax administration system when someone’s personal information is compromised. Identity thieves may then use a taxpayer’s identity to fraudulently file a tax return and claim a refund.

Protect Yourself from Becoming a Victim

The best way to avoid falling victim to identity theft is to guard your personal information. We all know that thieves target purses and wallets, but there are other ways thieves can collect data about you. Thieves can pose as someone who needs information from you, look through your trash, or steal information you provide to an unsecured website or in an unencrypted email.

Like the old adage says, the best defense is a good offense. Be proactive about protecting your personal information. Invest in a cross-cut shredder, and use it. Never trust unsolicited email requests for personal information from the IRS – the IRS will not initiate contact with you via email. Be skeptical of such information requests in general; it’s always best to confirm through the company’s legitimate website (not via a link in the suspect email) or with your trusted advisor by phone.

Justice Department statistics indicate it was the unauthorized use of existing credit cards that accounted for much of the fraudulent activity from 2005 through 2010. Fortunately, most people are liable for only up to $50 of fraudulent charges, and getting a replacement card is relatively painless. Other kinds of ID theft are less prevalent but more damaging, and can create many more problems for the legitimate consumer. If the fraudulent information gets on a credit report or impinges on another part of your life, it can take many hours – and sometimes a significant amount of money – to remediate the damage.

What To Do If You Think You May Be at Risk

Some clients prefer to take more initiative in protecting themselves while others prefer to buy protection. Those who prefer to do it themselves can opt to:

  • Freeze all their credit reports, limiting access to your report to companies that already have your business and limiting your own ability to obtain new credit without first lifting the freeze; or
  • Monitor their credit reports using the free annual report granted by federal law. Each credit reporting agency must provide one, so you can stagger your requests to each of them throughout the year.

Some consumers sign up for a credit monitoring service or buy identity theft protection. There are a variety of resources available at a range of annual fees, so do some comparison shopping before choosing a provider.

If you think that you may be at risk for identity theft due to a lost or stolen purse or wallet, questionable credit card activity, an unexpected bad credit report or any other way, contact the IRS Identity Protection Specialized Unit toll-free at 1-800-908-4490. For more information visit the Identity Protection home page at www.irs.gov and click on the Identity Theft link at the bottom of the page.

If you think someone used your SSN to get a job or tax refund, or the IRS sends you a notice or letter indicating a problem, contact the IRS immediately. Specialists will work with you to get your tax return filed, get you any refund you are due, and protect your IRS account from identity thieves in the future.

Call the IRS Identity Protection Specialized Unit at 1‑800‑908‑4490. Report the fraud, and send a copy of your police report or an IRS ID Theft Affidavit Form 14039 and proof of your identity (copy of your Social Security card, drivers license, or passport). And keep a record of your calls and copies of your letters to the IRS.