Tax-related identity theft can turn your life upside down and take years to resolve. I know, because it happened to me in 2007, after someone submitted an electronic tax return—days before I filed—containing personal information about me and my family, and a bogus return address. The mess took piles of paperwork, a tax advocate, and more than two years to resolve. To this day I still have nightmares that it could happen again.
Fortunately, consumers are more aware of the problem, and the IRS has made strides to educate the public, help victims, and prevent a reoccurrence. Here's some advice to flag potential problems:
I.D. protection tips
Protecting sensitive information in the first place and following up quickly to minimize the damage are paramount. Healthy skepticism can go a long way. For instance:
Ignore e-mails and social media purportedly from the IRS. The IRS doesn't contact taxpayers by e-mail, text message, Facebook, Twitter, or other social media. Nor does it send e-mails stating that you're being audited or getting a refund. That's a "phishing" scam, which you should report at email@example.com.
Confirm the authenticity of letters from the IRS. Check the agency's official contact page.
Check the URL of "IRS" tax information pages. The agency's website begins with www.irs.gov. Others are fakes.
If you are a victim
For fiscal year 2012, the IRS tripled the number of criminal investigations vs. 2011 of tax-related ID theft cases, which resulted in nearly 500 indictments. Still, hundreds of thousands of people have been victimized. To help those taxpayers, the agency is:
Expanding unique "PIN" program. In documented cases of I.D. theft, the IRS now assigns victims a unique personal identification number, which must be included on return. This has given me the biggest peace of mind since my tax nightmare. The IRS has issued PINs to more than 770,000 taxpayers, double the number of recipients in 2011. That means faster processing and a speedier refund.
Speeding up victim case resolution. Because resolving I.D. theft cases can take up to six month, the IRS has assigned more employees to sort through the details and streamline the process.
Lending an ear. The IRS now has a dedicated section on its website devoted to the problem. In addition, it has implemented a special phone number for victims. The IRS Identity Protection Specialized Unit is available at 1-800-908-4490.
Also see our January 2013 report on the right way to prevent identity theft.