What You Need to Know about Fraudulant Returns

In today’s world, people commit all kinds of fraud, and one of the worst is tax fraud, often committed by someone filing a false return in your name. If they have your social security number and various other pieces of information, it’s really not that hard to do.   

Usually, when people do this, they’re hoping to collect a tax refund on your behalf. They typically act quickly, filing as soon as the IRS starts accepting returns. For this reason, it’s always in your best interest to file as early as possible. However, knowing the warning signs of this kind of tax fraud and acting quickly if you discover or suspect it can also help you.

Have You Been Victimized?

Could you be a victim of tax return fraud without even knowing it?

Sadly, a lot of people don’t even realize there’s a problem until they try to e-file their return and get a notification that a return has already been filed on their behalf. If this happens to you and you know you haven’t filed a return, report it to the IRS immediately.

You might also be notified by the IRS if it suspects that a fraudulent return has been filed. When this happens, they’ll send you a notice and will not send out any refunds owed until they’ve confirmed your identity and verified which return is real and legitimately from you. This most often happens if they have two returns in hand or if they notice something odd or “off” about your return.

How to Verify Your Identity

If you have been victimized or if the government simply thinks that you have, the IRS will, as mentioned above, take steps to confirm your identity.

Most often, you can do this online via the IRS’ official website following their instructions. You’ll need a prior year’s tax return, your birthdate, and your social security number to verify.

Remember, too, that any instructions about verifying your identity will come from the IRS via an official letter, not through email. Do not click on any links, even if they look like they’re from the IRS, and don’t enter sensitive information on any non-official webpages. These can all be attempts to further commit fraud against you.

Being a victim of tax return fraud is scary. But, there are things you can do to protect yourself, both after the incident and in the future. Work carefully with a qualified tax professional to learn more about keeping yourself and your information secure.

New IRS Tax Fraud Laws

Most people think of the IRS as being this “perfect” federal body that is incapable of making mistakes. However, that’s not necessarily true! In fact, recently, the IRS accidentally sent out a large number of refunds to people who had been flagged for possibly having fraudulent returns. This was all due to a computer glitch, but, regardless, the mistake got the IRS to crack down on tax fraud and invent some new laws related to it.

These laws were passed under what is known as the Protecting Americans from Tax Hikes (PATH) Act. The Act went into effect for taxpayers in 2016 , and it’s important to understand the related laws and how they might affect you.   

Tax Credits

First of all, the PATH act has made it so that two refundable tax credits, the Earned Income Tax Credit and the Additional Child Tax Credit, are delayed. Since these credits are very vulnerable to fraudulent filing, the IRS now takes the extra time to ensure only those who are truly entitled to these credits receive them. So, if you’re banking on these credits, don’t be surprised if you receive them a little later than usual.

Individual Taxpayer Identification Numbers

Another change that the act has brought about relates to people who do not have social security numbers and who, instead, have individual taxpayer identification numbers (ITINs). These people now have to face the fact that their ITINs become invalid if they don’t use them to file a return within three years. Those whose ITINs become invalid will have to renew their numbers through the IRS before they can use them again

The Security Summit Initiative

Finally, you should know that the IRS has partnered with major tax companies to reduce the risk of identity theft via taxes. Under measures known as the Security Summit Initiative, the IRS has made it a whole lot harder for thieves to steal the information of taxpayers. You’ll likely notice these effects by more stringent password requirements, extensive identity checking, and getting locked out of your account when you enter wrong information on tax related sites.

As you can see, the IRS isn’t taking any chances when it comes to identity theft! And, while some of the changes that have been implemented may cause small annoyances in your life, remember the IRS is doing it all for your own good!