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Financial
Sep 11, 2017

Equifax Breach Highlights The Need To Protect Against Tax Identity Theft

Sponsored Content provided by Adam Shay - Director of VCFO Services, Red Bike Advisors

The Equifax data breach announced on September 7 has the potential to greatly increase the amount of tax identity theft.
 
While not widespread, we definitely see cases of income tax identity theft each year. The way the scam typically works is criminals steal someone's social security number via a data breach, carelessness with personal information or a phone scam.  They then submit false information on income tax returns to generate a large income tax refund. 
 
Eventually, enough people report the issue, hopefully the government tracks them down and the criminals get arrested.  The government is also implementing preventive measures such as trying to do timely and better data matching with information reported on income tax returns.
 
As long as it's an easy fraud with a long-time to track down, criminals will continue to pursue this scam.
 

How do you protect yourself from income tax identity theft?

  • Be sure to secure your personal information. Do not send or share identity information insecurely via email or other means.
  • Consider using a free service such as credit karma or free credit reports from the three credit agencies to monitor changes to your credit. While income tax identity theft may precede credit identity theft, catching credit identity theft will let you know you are susceptible to income tax identity theft.
  • Don't fall for phone scams. Neither IRS agents nor state revenue agents will demand payment or personal information via phone calls. It's one of the many phone scams that can be used to get your personal information.
  • If you want to be proactive and you meet qualifying conditions, you can voluntarily apply for an IRS IP PIN, which is a six-digit number that changes each year and must be submitted with your tax return. If a return requires the number and is submitted without it then it is automatically rejected by the IRS.


How do you know if you've been a victim of income tax identity theft?

The way you typically know is your electronically filed income tax return rejects out and indicates you have previously filed an income tax return.

 
What do you do if you've been subjected to income tax identity theft?

If you suspect you've been subjected to income tax identity theft you should contact the IRS immediately. You will be required to paper file your tax return. If you know the issue to be identity theft, you should file an IRS Identity Theft Affidavit and pursue getting an IRS IP PIN for future years. A tax professional can really help in these situations.
 
The purpose of this article was to make you aware of income tax related identity theft, ways to prevent it and what to do if you experience it.

Adam Shay, CPA (N.C. License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. He focuses on minimizing taxes and improving the financial results of entrepreneurs, and is actively involved in supporting the Wilmington entrepreneurial and startup community. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at (910) 256-3456.

 

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