There are many ways a thief can steal your identity and use it to commit fraud. It’s scary that someone ”out there” can use your information to break the law. They might apply for and obtain a credit card, buy a car, or take out a mortgage in your name. Or, they might apply for government benefits or seek medical care in your name, leaving you with a hefty bill and a life-threatening diagnosis in your medical records. They might even provide your identity at the time of their arrest for a horrible crime.
One form of identity theft that doesn’t get a lot of attention is tax refund fraud. This is interesting considering the astronomical costs associated with the crime. According to the Internal Revenue Service (IRS), tax refund fraud was expected to be around $21 billion in 2016.
Tax refund fraud happens when someone has stolen enough of your identifying information to file a fraudulent tax return in your name. It’s such a lucrative, relatively safe and easy crime that notorious street gangs have turned to tax identity theft instead of more typical crimes.
According to the Identity Theft Resource Center’s (ITRC) Identity Theft: The Aftermath 2016â¢ report, 27.1 percent of respondents surveyed stated that someone had filed a federal tax return in their name in 2015, up from 16.3 percent in 2014. Another 17.1 percent claimed that someone had filed a state tax return in their name, up from 12.6 percent the year before. Sadly, nearly half of the respondents (47.5 percent) said there was a lengthy delay in receiving their legitimate tax refunds, which can place a financial hardship on taxpayers who are counting on receiving the funds in a timely fashion.
One of the only courses of action for taxpayers especially those who know their personally identifiable information has already been stolen or compromised is to file as early as possible. If you wait until the April 15 deadline, there’s an excellent chance that a thief will beat you to it.
Unfortunately, the only way to discover that the fraud has already been committed is when your legitimate tax return is rejected for being a duplicate. If that happens to you, the ITRC has a website, a toll-free call center and a mobile app that can help you begin the process of correcting it. You can also contact the IRS Identity Protection Specialized Unit at 1-800-908-4490 for assistance, as well as take other preventative steps outlined by the Federal Trade Commission and the IRS.
Remember, filing early not only gets a heavy task off your to-do list, it can also prevent even more time consuming problems down the road. Don’t wait until it’s too late to beat someone to your refund.