Tax return identity theft occurs when someone uses a social security number to file a tax return claiming a fraudulent refund. It happens more frequently every year. E-filed individual income tax returns are rejected because of a duplicate filing under a social security number.
The steps to remedy tax return identity theft necessarily focus on the taxpayer’s SSN (the initial victim):
- File an identity theft complaint with the FTC;
- Contact the three (3) major credit bureaus and place a fraud alert on your credit records;
- Contact applicable financial institutions and close any known accounts opened without your permission;
- If applicable, Complete IRS Form 14039 – Identity Theft Affidavit; and
- Continue to pay applicable taxes and file applicable returns – file paper returns if needed.
These are necessary and established remedies; however, related minor children (dependents) can become easily overlooked victims. If a fraudster obtains a copy of a tax return, the taxpayer’s dependents (usually minor children) will be listed along with their respective social security numbers.
The identity information and social security numbers of minor children can be (and often are) much more valuable to identify thieves than identities for adults and elderly persons. The main reason for this is the often lengthy time horizon between when a social security number is issued (almost immediately after birth) and the time of an initial credit application (generally late teens / early twenties).
Identity thieves can use social security numbers of minor children to fraudulently obtain credit and/or establish accounts for which detection may not occur for years (or even decades).
The consequences can be dire – A young adult initially applying for credit learns of years of unbeknownst fraudulent credit activity when attempting to buy a car, lease an apartment, buy a home, etc.
An inaccurate credit report affects many areas besides financing as well, even an individual’s ability to obtain employment. Many employers now run credit reports as part of their hiring process.
If you are an identified victim of tax return identity theft or have other reason to believe that your personally identifiable information has been compromised, it is extremely important to contact the three (3) major credit bureaus to place credit freezes on related minor children as well. There may be associated fees (e.g., based on if the individual is a known identity theft victim), depending on your state of residence. Some of the credit bureaus (e.g., Equifax) do not charge fees related to minors, even if allowed by the applicable state. These fees are small compared to the potential damage they insure against.
Equifax provides a concise summary of state requirements and potentially associated fees on its website.
The three (3) credit bureaus can be contacted at the following:
For more information on Tax Return Identity Theft contact your MarksNelson professional at 816-743-7700.
About the author
G. Matt Barberich, Jr., provides business valuation, forensic accounting, and litigation support services for attorneys and clients