Identity theft using tax returns is on the rise, and stealing your identity and scoring a tax refund in your name is big business for crooks. The Federal Trade Commission fielded 221,854 complaints through November 2015, up from 109,250 in 2014. While people who have had their Social Security numbers compromised are the most vulnerable, everyone is at risk.
But you can take some measures to make sure this doesn’t happen to you.
Here’s how this crime works: Someone gets ahold of your name, your Social Security number, and your date of birth. Then, using your identity, that person files with the IRS a tax return claiming a refund. The crook gets the money, and when you file your return, you get blocked out. It can take months for you to straighten things out and get any refund that’s lawfully yours.
So how can you defend yourself?
File Before the Crooks Do: The first thing to do is file your tax return as soon as possible. As many as 80% of Americans file their taxes after April 1. That gives identity thieves a lot of time to claim your return before you do. It’s too late to get a huge jump on this year, but earlier is still better. Even if you won’t get a refund, thieves can still cook up a return in your name.
Get a Pass Code: If your identity was stolen before, or if you’ve ever lost your wallet and think you may be at risk-, fill out Form 14039, which lets you apply for an Identity Protection PIN. It will lock you into using an IP PIN (you get a new one every year), but it will also lock out anyone without it.
Report Problems: If you discover you are a victim of tax-refund ID theft (likely via a letter from the IRS), inform the police and credit bureaus. Follow the IRS’s instructions about what to do, tell the police, and inform the three major credit bureaus. You can find detailed instructions at identitytheft.gov. But be patient: The IRS takes nine months, on average, to resolve these cases.