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When Someone Steals Your Identity and Refund

Imagine – you finally hit the send button on your electronic tax return only to find out that someone else already has filed in your name — and cashed your refund.

That happened to a friend of mine, and unfortunately occurs to thousands of taxpayers each year. Identity theft topped the list of consumer complaints made to the Federal Trade Commission in 2010 for the 11th year in a row, with more than 250,000 complaints.

And tax-related identity theft is no small chunk of change. In 2009, the Internal Revenue Service handled 23,000 cases of fraudsters using forged W-2 forms to collect tax refunds, according to the latest figures available. That year, there also were 24,000 cases of people using a stolen Social Security number to report income under another person’s name.

Sometimes the identity theft is obvious. Your e-filed tax return is rejected because someone has already filed under your name. Other times, “you get a notice from the IRS that says their records show you made more money than you reported on your tax return,” says Adam Levin, chairman of Identity Theft 911, an identity theft protection company. A less obvious sign  - the refund you have been waiting for never arrives.

But don’t rush to claim identity theft because of a late refund, he warns. “You don’t want to flag yourself until you know you’ve got a problem,” says Levin. You don’t want an unnecessary tax audit. It normally takes about six weeks to get your check if you file by paper, or three weeks if you file online, says Levin. If the IRS says your check has already been cashed, and it wasn’t by you, that’s confirmation that identity theft could be involved.

Your main defense is to launch an investigation with the IRS, which will work to confirm your identity, track down the fraudster and recover your refund. Each incident has a different outcome, but most taxpayers should expect to wait at least six months for the case to be resolved, according to Identity Theft 911.

You can report suspected identity theft to the IRS Identity Protection Specialized Unit at1-800-908-4490. You’ll need to have certain documents to prove your identity, including your W-2 forms, previous tax returns and a photo ID. You should also check your credit report and let the reporting agencies know about any fraudulent loans or credit cards that may have been opened in your name, says Levin. The FTC also offers tips for reporting identity theft, which include filing a report with your local police department and placing a fraud alert on your credit reports.

All kinds of identity theft stem from the same problem: someone misuses your Social Security number. So be suspicious anytime someone asks for it. Taxpayers should be aware that the IRS will never contact them via email, and should forward any suspicious emails or websites to phishing@irs.gov. See more tips from the IRS are on its website.  Levin’s group recommends taking extra steps at home, such as keeping sensitive tax forms stored on your computer in a password-protected drive or disk and destroying old computers, printers or fax machines that might hold tax information. Also, don’t forget to vet your tax preparer .

Readers, have you ever had you ever suffered from tax related identity theft? Was it a nightmare? What tips can you offer?


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

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    • I figured this would be the case, but had to be sure. Thanks for confirming my thoughts on this matter. Have a nice day. Reg Zooka

    • Hello, i read your blog from time to time and i own a similar one and i was just curious if you get a lot of spam feedback? If so how do you protect against it, any plugin or anything you can suggest? I get so much lately it’s driving me mad so any help is very much appreciated.

    • Just happened to me except I owe over $3000.00 but the person that tried the fraud wants a refund. Losers should work for their money like I do! Not sure that will happen to this person because “Privacy” protects them. Imagine they use my name, address and SSN and they have privacy! Seriously!!!! I’ll file the Fraud Avidavit with my return and wait for my Bill that with what I owe them.

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    • “What conclusions?That rich plpeoe aren’t parasites and they work hard for what they’ve acquired…”to the great benefit of everybody in society.”When was the last time a poor person put someone to work and paid that person a paycheck?The other questionable benefit, the rich pay more taxes:

About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (SmartMoney.com), retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at thetaxblog@dowjones.com.