What’s the fastest-rising form of identity fraud in the United States?
According to recent numbers from the Federal Trade Commission, tax refund fraud is the biggest contributor to a recent spike in ID theft. According to the FTC, there was a 47% spike in ID theft in 2015. That’s a pretty big hike, and a large portion of it is due to tax refund fraud.
The FTC says that tax refund fraud represents the fastest growing and largest ID theft category that they track.
How Does Tax Refund Fraud Work?
One of the biggest forms of tax refund fraud occurs when someone takes your personal information and files a tax return in your name. The fraudster claims a refund in your name — whether or not you are actually entitled to a refund. You might not be made aware of the situation until the IRS contacts you with questions. In some cases, you don’t even realize this is a problem until you file your own tax return, only to be told that the IRS has your paperwork already.
It can be difficult to straighten out the problem and requires that you complete additional paperwork and verify your identity.
Bill Aimed at Helping Tax Fraud Victims
The process of re-establishing your identity with the IRS, and figuring out what you need to do next, can be complicated. The U.S. House of Representatives just passed a bill designed to help tax fraud victims. The bill is moving on to the Senate, and there are hopes that Congress can help victims improve their status with a little less fuss.
Some of the items included in the bill are meant to create a central point of contact at the IRS for victims of ID theft and a protocol for improving the way the IRS notifies taxpayers of suspected ID theft. The idea is to let victims know sooner and to provide them with a place they can go to get more information and support as they go through the process.
The bill also wants to establish a center to share and analyze data. Collecting actionable data about tax fraud and ID theft, and sharing it can potentially help identify patterns that can lead to quicker detection and better prevention.
Even though Congress looks to act on this issue, the reality is likely that ID fraudsters are going to remain a step ahead. It’s up to you to do your best to protect yourself from tax fraud. You can reduce the chances that you will be a victim by protecting your personal information as much as possible. The new law is hoping to help by allowing for truncated Social Security numbers to show up on paperwork, rather than revealing the whole number.
You can also reduce the chances of someone successfully claiming a refund in your name by filing your tax return as early as possible. That way, it’s your accurate return that receives primacy in the IRS system.
There’s no way to completely protect yourself from ID theft or tax refund fraud, but you can reduce the chances that you will be a victim, and you can take steps to limit the damage as much as possible.