What Do You Know about Taxpayer Identity Theft?
You’ve probably heard of the crime known as identity theft, in which a criminal uses someone’s sensitive information (like Social Security Number, credit card number, or bank account information) to make fraudulent financial transactions.
But have you heard about the newest version of this nefarious crime? It’s called taxpayer identity theft and, according to the Government Accountability Office (GAO), it’s become five times more common in the last two years. It works like this:
- The identity theft uses someone else’s SSN to get a job: People may do this for a variety of reasons, including criminal records or illegal residential status. Regardless, it can wreak havoc on the victim’s life and finances.
- The identity thief files his taxes early: Most legitimate taxpayers tend to wait until later in the season to file, so getting the paperwork in early increases a thief’s chances of going undetected.
- The victim files his tax return: When the victim of taxpayer identity theft submits his forms to the IRS, he finds out his forms have “already” been submitted. That is, forms with his information have been submitted by someone else.
- The victim has to sort everything out: According to sources, this can mean hours of phone calls to government agencies, credit card issuers and banks in an effort to clear up the confusion. In many cases, victims have to wait up to six months to get any tax returns owed them.
- The IRS distributes an official form: To help the victim with future confusion the identity theft is likely to cause, the IRS offers victims an official document (the 14039 form, or the IRS Identity Theft Affidavit).
As identity theft victims know, sorting through the mess left by an identity thief is not for the faint of heart. Identity theft can cause:
- Credit score damages: Identity thieves can open new credit accounts, max out existing cards, drain bank accounts and more, depending on what information they get. All these can hurt a credit score. (Note: credit reporting bureaus will remove such information, but it takes a lot of legwork on the victim’s part.)
- Bankruptcy: Even though there are protections in place to prevent identity theft from leading to bankruptcy, many filers indicate that a stolen identity was one factor that led them to file.
- Criminal troubles: Depending on what kinds of actions an identity thief engages in, a victim can be mistakenly apprehended by law enforcement agencies. Like most identity theft consequences, this can generally be cleared up, but not without effort on the victim’s part.
The bottom line? Identity thieves are constantly thinking of new ways to get their hands on sensitive information. Be careful with yours.
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