Tuesday, June 26, 2012

Identity Theft: A rapidly growing IRS problem

Whether you realize it or not, one of the larger issues the IRS has to deal with in recent years is identity theft. Overall, identity theft has increased significantly in the last three years, from just under 52,000 in 2008 to nearly 170,000 in 2009 to over 248,000 in 2010. Usually the theft involves individuals filing false returns, and cashing refunds of other taxpayers, but cases also include employment fraud. Most individuals find out they have been a victim of identity theft, when they go to file their return, and it is rejected due to a return already filed under their social security number. Usually fraud claims take quite a long time to iron out with the IRS, but there are a few changes the IRS has implemented in recent years to try to counteract fraudulent claims.

One major change the IRS has implemented is issuing special pin numbers to past victims of fraud. The use of these pin numbers can cut down on the incidents of fraud, because only the true recipient of the pin number will be able to e-file their return, and as an extra layer of security, the pin numbers are not issued or accessible by the IRS, so would-be fraudsters cannot gain access to this information. However, there is a small problem if a person who has been issued a pin number cannot find their pin. Since the pin numbers cannot be accessed by the IRS, if a person loses their pin, they will not be able to receive a replacement pin, thereby eliminating the extra security their return should have received.

These changes are good, but what can a person do to prevent their information from being stolen, and a false return being issued in their name? At the end of the day, the best practice is diligence. 

Do not provide sensitive information to unscrupulous sources. Destroy sensitive information appropriately. Try to secure your mail, to try and eliminate access to otherwise sensitive information. Be careful what type of information you make available through email and the internet. There are many ways you can help to avoid providing access to your personal information, but if you do have a false return filed in your name, try to rectify the discrepancy as soon as possible with the IRS, and be diligent in this task to make sure the IRS agent is following through with their promises and deadlines.

The information age can be a good thing, but certain information in the wrong hands can lead to headaches. 

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