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Your Taxes and Identity Theft

Tax Preparation Services May Be a Bad Idea


Your Taxes and Identity Theft

The IRS will not give you a tax refund if they have already processed one this year in your name. And sometimes, the culprit is an identity thief working for the tax preparation service.

Getty/Elizabeth Simpson

Tax time is rolling around, you probably already have your W-2, and you can’t wait to get your money back from the government. Most Americans already have plans for their tax refund before they even send their information to the IRS. But this time of year is also big for identity thieves, and some of us may be in for a shock. Taxpayers may find their refund has already been claimed by a trusted advisor, their tax service.

In recent years, H&R Block, possibly the best-known tax preparation service in the country, has had several instances of employees stealing clients’ information and obtaining credit cards, or filing returns and pocketing the money.

In fairness, H&R Block gets most of the press because of their market penetration – as the best-known tax preparation service, identity thieves and scam artists will try to work for them. Other tax preparation services have been hit just as hard with these types of crimes – but the end result is the same: someone else gets your money.

Even if your tax preparer is above-board, though, you may still find you have problems to deal with. Someone else may have gotten your information and filed in your name. Again, the IRS will tell you they have already issued you a refund – and they will not issue another one. If this happens, you’re pretty much on your own to figure out who has your money, and how to get it back. Just be prepared to be out the money, because there is very little chance of getting it back, unless you personally know the identity thief (for example if it is a friend or family member that filed in your name.)

The IRS will also reject your tax return if the amount you claim you earned last year does not match their records. This happens if your social security number is used by someone else (or several someone elses) to work illegally. Generally, these are illegal immigrants and criminals who do not want their true identity known. Since employers are required to have an I-9 form on hand for every employee, each employee is required to provide a picture ID and social security card. (This is really the biggest reason for social security identity theft, and the reason every American should be pressuring the government to address the illegal immigrant issue.) Many of us find out we are victims of identity theft when we file our taxes and are rejected for our refund because of this specific issue.

So what do you do? The FTC says you need to deal with the IRS directly. In turn, the IRS will want you to fill out the IRS Identity Theft Affidavit (Form 14039). And although they will take your complaint, there is little chance they will provide much help in the way of getting your money. Simply put, if they’ve already cut a check to cover your social security number, they will want to recover the money before issuing a new check, and identity thieves are very good at covering their tracks. Occasionally, the situation is bad enough that they will issue you a new social security number, but this is a solution they are very reluctant to provide.

So how does the savvy consumer handle their taxes? Your Guide feels the most secure way to file your taxes is over the internet. Paper forms have a way of falling into the wrong hands, and you have to keep copies of them stored somewhere. Most people will just toss these into a desk drawer, where anyone who has access to their home can find them. Since you may need them if you are audited, shredding them is a bad idea. The only other option with a paper form is to put it in a lockbox or personal safe in your home…and most consumers haven’t invested in one of these yet. Despite what most people have heard, very little identity theft happens on the internet, and most reports of identity theft that do happen on the internet involve sites like eBay or CraigsList. The only other place the internet is a hazard to your identity is when hackers attack your bank or a credit organization and steal masses of information…and this isn’t something you can protect yourself from anyway.

Finally, if you need to talk with the IRS directly about an identity theft, you can contact the IRS Identity Protection Specialized Unit toll free at 800-908-4490 between 8:00 AM and 8:00 PM Monday through Friday (Alaska and Hawaii follow Pacific Time.)

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