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Tax Advice for Victims of Identity Theft

The IRS reported a total of 1.6 million victims of identity theft involving stolen tax refunds in the first half of 2013, compared to just 271,000 for the whole of 2010. In monetary terms, the 2013 payout of stolen tax refunds came to $5.8 billion. The problem appears to be getting worse for 2014, with reports of penetrations of the computer systems of major tax preparation companies, including Turbo Tax, and widespread collection call scams.

If you are the victim of identity theft, here are some steps you can take:

  • Report your loss immediately. Make a police report. You will need to show that you have reported your loss to the police when dealing with government agencies or with credit bureaus.
  • Call the IRS Identity Protection Specialized Unit at 800-908-4490 or call the local Taxpayer Assistance Office. They will request that you file forms. The basic form to file is Form 14039, the identity theft affidavit. If it was your state tax refund that was stolen, you should immediately report the theft to your state tax agency. In Maine, that is the Maine Revenue Services.
  • Work closely with the tax authorities to verify your personal details. In these scams, the identity thief submits a tax return using your name. The identity thief may not know whether you file jointly with your spouse, the number and names of your dependents, and your sources of income or deduction. Once you file an identity theft affidavit with the IRS, the IRS compares your tax return against the one filed by the thief. You need to submit any personal details for verification purposes, such as your birth certificate, passport, driver’s license, marriage certificate (if married), children’s birth certificates, original W-2s and 1099s, and similar documentation. This makes it easier for the IRS to verify your tax return as the genuine one and reject the one by the thief.
  • Get an IRS PIN number. The IRS issues a PIN number for all victims of identity theft so that they can carefully check your account going forward.
  • Check your credit report and contact credit reporting agencies. If the identity thief has claimed your tax refund, the thief may also use your name for credit applications. Get a copy of your credit report from the major credit reporting bureaus – TransUnion, Equifax and Experian – and review it to find any erroneous entries, such as an account you did not open or loan you did not apply for. You are entitled by law to obtain one free credit report each year from each of the major credit reporting bureaus. Visit the U.S. Federal Trade Commission’s website for details.
  • Obtain a credit freeze. You may also request the credit reporting bureaus to issue a credit freeze under your name so that no new creditors can view your credit score and report. You can obtain one for free when you produce a police report demonstrating that you are the victim of fraud. Otherwise, you may have to pay a small fee. Even if you do not request a freeze, you should report your situation to the major credit reporting bureaus and request that they thoroughly review any application for credit, such as a credit card or loan application made under your name.
  • Change your passwords. If you have an online account with a tax preparation service like TurboTax, change your password immediately.
  • Hope for the best.

The IRS estimates that it will take about 180 days to resolve identity theft cases and to pay you your tax refund. If you cannot wait that long, contact the National Taxpayer Advocate at 877-777-4778 or your local Taxpayer Assistance Office.