What to do if you're a victim of ID theft

Identity fraud investigations are difficult and time-consuming

Despite increased investigation and enforcement by the Internal Revenue Service, fraudulent tax returns involving identity theft are becoming more prevalent.

This became clear in April, when the New Hampshire Medical Society issued a fraud alert to its members, making them aware that a number of Granite State physicians had been the victims of identity theft involving fraudulent tax returns being filed under their name.

Typically, the fraudster obtains someone’s Social Security number and files a return early in the year. Frequently, the fraudulent return reports a small amount of income, claims an earned income tax credit, and requests a refund. By filing early in tax season, the fraudster files before the taxpayer can file. Additionally, early filing ensures that the IRS processes the fraudulent return before items such as forms W-2 are available online, so there is no apparent mismatch between the income reported on the return and income reported to the IRS by the taxpayer’s employer.

Because the fraudulent refund request does not depend on actual amounts withheld from the victim’s paycheck, this crime affects taxpayers of all income levels.

The victim of this type of ID theft can learn of the problem in two ways. If the taxpayer files electronically, the filing will be rejected because a return has already been filed under the taxpayer’s Social Security number. If that happens, the taxpayer will be required to file the return on paper rather than electronically.

Taxpayers might also learn of possible ID theft upon receipt of a notice from the IRS informing them that two returns were filed under their Social Security number. A taxpayer who receives this type of notice should respond promptly to the IRS using the contact information in the notice.


Taking steps


Identity fraud investigations are difficult and time-consuming. The IRS estimates that an investigation may take six months.

A taxpayer who believes he or she may be at risk for ID theft due to a lost purse or wallet, or questionable credit card activity may contact the IRS Identity Protection Specialized Unit (800-908-4490, ext. 245) and request action to secure the account.

All potential ID theft victims will be required to complete and file Form 14039 with the IRS.

The IRS also suggests that an ID theft victim file a complaint with the Federal Trade Commission by contacting the FTC’s Identity Theft Hotline (877-438-4338 or ftc.gov/identitytheft).

In addition to contacting the IRS, if you are aware or suspect that you are a victim of ID theft, the FTC suggests that you take the following steps:

 • Place an initial fraud alert on your credit reports gathered by Experian, Transunion or Equifax. This will reduce the risk of new accounts being opened in your name. • Obtain copies of your credit report and review the report for accounts you did not open, debts you did not incur, or credit inquiries you did not authorize.

 • Contact the credit fraud department of any accounts that you identify as accounts you did not open or authorize.

 • Keep complete records of all actions taken, including the time and expense expended to deal with the ID theft. This information may be useful in litigation or criminal prosecution.

 • File a complaint with the Federal Trade Commission at ftccomplaintassistant.gov/

 • Prepare an identify theft affidavit, available online at the FTC’s website. This document can be used to dispute new accounts that were fraudulently opened.

 • File a police report and obtain an ID theft report from the police. This is another useful piece of evidence that demonstrates you were a victim of ID theft.

 • Work with creditors to dispute fraudulent accounts.

 • Contact your homeowners or general liability insurance provider to see if you have insurance coverage for ID theft.

Finally, taxpayers should remember that the IRS does not initiate taxpayer contact via telephone or email. Therefore, if a taxpayer receives a telephone call or email purportedly from the IRS, the taxpayer should not respond to the solicitation and should notify the IRS of the contact.

Patrick Closson, vice chair of the Corporate Department at McLane, Graf, Raulerson & Middleton, can be reached at patrick.closson@mclane.com.

Categories: Business Advice, Legal Advice