What has become abundantly clear over the last several years is that it doesn’t matter who you are, where you live or how you make a living – identity thieves do not discriminate. While tax refund fraud has been around since 2008, the size and scope of the scam has ballooned since then. Fast forward to 2013, and we find that the rapid escalation of this particular scam claimed a jaw-dropping $5.2 billion, according to the United States Government Accountability Office.
Locally, business owners continue to steadily report instances of identity theft and tax refund fraud to local law enforcement as well as to their financial advisors. From our perspective, we continue to see more instances of refund fraud than in previous years, particularly among healthcare professionals, which is a trend that is only expected to get worse.
Is It Too Late For You?
You probably won’t even know that you’ve been a victim of tax refund fraud until it’s too late. Some taxpayers will learn about the breach after receiving a letter from the IRS or from their state’s taxation department. It’s also likely that your accountant will be the first one to make the discovery when they try to file your tax return and receive a notification that the name and Social Security Number of their client – you – has already been used.
Here’s where it gets tricky.
Once it’s been discovered that you have been victimized, the burden is on you to prove your identity to the IRS to obtain the tax refund that is rightfully yours. The good news is that once you are able to prove that you are who you say you are, the IRS will happily release your money. But the bad news is that the entire process can take a lot of time and can be confusing to navigate.
Rea & Associates recently released a compilation of documents and resources from a variety of sources to help victims recover from Identity Theft & Refund Fraud, which can be an overwhelming task in itself. The steps victims must complete include:
- Filing a report with the local police
- Filing a complaint with the Federal Trade Commission
- Contact one of the three major credit bureaus to place a “fraud alert on your credit records.
- Respond immediately to any IRS notice by calling the number provided
- Complete the Identity Theft Affidavit
You don’t have to go through it alone. Your financial advisor can help you through the steps and can communicate with the IRS on your behalf. Your advisor can also determine the validity of documents and phone calls if you have further concerns.
IRS Calling? Don’t Buy It
In addition to stealing your federal and state tax returns, some scammers are going the extra mile to harass their victims to pay “back taxes” that they don’t actually owe. It’s important to remember that the IRS will never contact you by phone or in person. The first correspondence you will have with the IRS will always be in the form of a letter – not a phone call. Last year, more than 1,000 taxpayers collectively lost about $5 million after scammers called to demand payment to settle their debt with the IRS. Failure to pay, the scammers warned, would result in jail time and driver’s license revocation.
For additional guidance, click here to read How to Recover from Identity Theft & Refund Fraud: A Compilation of Documents and Resources and get access to valuable information about what you should watch out for and how you can recover. For more information or for help claiming your tax return, email the Bright Dental CPAs at Rea & Associates.
By Alan Hill, CPA (Mentor office)