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As tax season winds down, experts warn that a common but often hidden crime is on the rise: tax identity theft.
The crime happens when thieves use personal information to file a tax return in someone else’s name and collect a refund. When the legitimate taxpayer later files, the IRS may report the refund has already been sent.
At Optima Tax Relief, where employees process tens of thousands of IRS notices each day, experts say the problem is growing.
“One thing about Tax ID theft is it’s kind of unseen. It’s a stealthy crime. So you may not be aware what’s happening behind the scenes, and criminals don’t tend to take days off,” said David King of Optima Tax Relief.
King said tax identity theft often targets vulnerable populations, including people who do not always have a filing requirement.
“Where we see this impact folks the most is the most vulnerable population, because those folks may not even file. They may not have a filing requirement. Then down the line, they may even get a bill from the IRS, which makes things even worse,” he said.
King recommends that taxpayers protect themselves by obtaining an IRS Identity Protection PIN, known as an IP PIN. The number must be used each time your taxes are filed.
“It is exclusive to you, and you use it every time you file. Hopefully, the criminals don’t get a hold of that pin, which becomes a burden, of course, and we see that happening as well, but it’s a layer of defense,” King said.
Another growing concern is employment fraud. In those cases, someone uses another person’s Social Security Number to get a job, leaving the victim responsible for the tax bill.
“This 1099, or this W-2 for that matter, somebody’s working with your Social Security Number, collecting and probably not withholding, so you’re going to have a tax bill down the line when they file. Unfortunately, it’s yours until proven otherwise,” King said.
Even if the victim never earned the income, the taxes may still be owed while the case is under review. Resolving the issue can take a long time.
“When you notify the IRS of, ‘This is a fraudulent filing,’ it takes almost two years right now to solve that. So the reduction of staff with the IRS, combined with the increase of ID theft, is really a terrible formula for taxpayers out there, for victims,” King said.
As the filing deadline approaches, experts say the risk of fraud increases. The IRS is focused on processing returns during the peak of tax season.
“They’re more about processing returns during this time and not about informing taxpayers that something’s happened. If they are flagged, there’s over two million returns flagged every single year of potential fraud,” King said.
Experts advise taxpayers to stay proactive by monitoring tax records, protecting personal information and filing early when possible. Those not ready to file are urged to request an extension before April 15 to avoid additional problems.
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