By CAROLE FELDMAN
WASHINGTON — Rejected.
A notice from the Internal Revenue Service saying your return won’t be accepted might be your first clue that your identity has been stolen.
“The IRS recognizes the first return submitted under a Social Security number, and usually the identity theft is identified when the second return is filed” under that same number, said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting, US.
Another clue might be an IRS notice saying you have unreported income. That could happen if someone steals your Social Security number and gives it to an employer to avoid being taxed on earned wages. You get the tax bill instead.
Identity theft could lead to long delays in getting your refund or bigger tax bills for unreported income.
“Tax refund fraud associated with identity theft (IDT) continues to be an evolving threat, one that imposes a serious financial and emotional toll on honest taxpayers and threatens the integrity of the tax administration system,” the Government Accountability Office said in a report in August.
More than 236,000 tax returns processed last year were deemed fraudulent because of identity theft, and nearly $1.2 billion in refunds from those fraudulent returns were blocked, according to the Treasury Inspector General for Tax Administration.
The number of identity-theft returns is down significantly from 2012, and the IG said in a report last fall that new filters the IRS put in place to identify the crime may be responsible.
“The IRS is investing in that area,” said Bob Meighan, vice president of consumer advocacy for TurboTax.
“People have to have confidence that the returns that they file are protected and secure,” he said.
The IRS is providing identity-theft victims with a personal identification number to prove who they are when filing tax returns. In 2014, more than 1.2 million of these identity-protection PINs were issued by the agency, up from 770,000 the previous year.
The agency also has more than doubled the number of workers assigned to identity-theft cases since 2011, to about 3,000 in 2014, according to the GAO.
Beginning this year, the number of refunds direct-deposited to a single account is limited to three, another attempt to reduce identity theft. “The fourth and subsequent refunds automatically will convert to a paper refund check and be mailed to the taxpayer,” the IRS said.
National Taxpayer Advocate Nina Olson wants the agency to do more.
She has called identity theft “an invasive crime that can have a traumatic emotional impact.” She said early last year that she has called on the IRS to designate a single point of contact, someone who can provide “sensitive, holistic assistance” to an identity-theft victim.
Kathy Pickering, executive director of the Tax Institute at H&R Block, says prevention is the best defense. Don’t give out your Social Security number or your date of birth, she says.
The IRS also advises people to protect their personal computers and Internet accounts, check their credit reports and avoid giving out personal information over the phone, especially if you didn’t initiate the call.
And beware of phishing attempts – online or over the phone that seek access to your personal information.
“The IRS does not initiate contact with taxpayers by email to request personal or financial information,” the agency said. “This includes any type of electronic communication, such as text messages and social media channels.”
If you get a notice from the IRS that
leads you to believe you are an identity-theft victim, the IRS says you should respond immediately. The first step, the agency says, is to complete an Identity Theft Affadavit, Form 14039. It’s available at www.irs.gov , and should be filled out and mailed or faxed according to the instructions provided.
If the issue remains unresolved, taxpayers should contact the Identity Protection Specialized Unit at 1-800-908-4490.
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