David Lerner Associates: Beware the Tax Identity Theft Scam
In December, Target made headlines for one of the worst possible reasons. The giant retailer announced that they had been the victim of a data security breach that compromised 40 million credit and debit card accounts, potentially exposing the personal information of 70 million people to identity thieves.
Since then, it has been reported that the cyber attack on Target may have been part of a broad and highly sophisticated international hacking campaign against multiple retailers, not just Target. Once they steal sensitive personal information, identity thieves either sell it on the black market or use it themselves to make unauthorized purchases.
Fraudulent Tax Refund Claims
Unfortunately, theft of your credit or debit card information by sophisticated computer hackers isn’t the only kind of identity theft you have to worry about. As we enter the height of tax-filing season, there have been complaints of another kind of identity theft: tax identity theft. Here, thieves try to steal your personal information in order to submit fraudulent tax refund claims with your information on them to the IRS.
Identity thieves have stolen the names and Social Security numbers of more than one million victims and used them to submit billions of dollars worth of fraudulent refund claims to the IRS. Victims often have to spend months corresponding with the IRS to clear up the fraud and receive their own tax refunds. According to the U.S. Federal Trade Commission:
“Identity theft has been the top consumer complaint to the FTC for 13 consecutive years with tax identity theft showing an increasing share of the Commission’s identity theft complaints.” In 2012, tax identity theft accounted for more than 43 percent of all identity theft complaints — up from just 15 percent of all complaints in 2010. The FTC notes that this makes tax identity theft “the largest category of identity theft complaints by a substantial margin.”
There is almost no end to the creative ways identity thieves have attempted to commit tax identity theft. In one instance, a part-time data entry clerk stole paper tax returns, using the information to file fraudulent tax returns seeking large refunds. In another, a collection agency employee stole debtors’ personal information and gave it to others who used it to file fraudulent returns seeking refunds. And in still another, a customer service rep for a student loan processor stole borrowers’ IDs and gave them to a tax preparer who used them to file fraudulent returns seeking refunds.
Precautions to Take
Here are a few security precautions to take with regard to tax identity theft:
• Be very wary if anyone asks for your Social Security number. The IRS will not ask for your Social Security number via email, text, or a social media message. If you receive any kind of message like this asking for your Social Security number, do not reply or click on any links; instead, forward it to [email protected].
• Pay especially close attention to any IRS notices you receive. If a thief uses your Social Security number to get a job, the thief’s income may be reported to the IRS under your name. In this case, you may receive a notice from the IRS stating that you didn’t report all your wages. Such a notice could be a major red flag indicating possible tax identity theft.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC