Experts Say Tax-Related Identity Theft Most Likely to Occur Early in the Season

Published: October 29, 2013

Experts Say Tax-Related Identity Theft Most Likely to Occur Early in the Season

CORPUS CHRISTI, Texas – Tax return and other tax-related identity theft has become a growing problem in recent years.  The IRS found that for the 2011 filing season, identity theft-related fraud accounted for approximately 1.5 million tax returns in excess of $5.2 billion. The IRS has detected cases of tax identity fraud in every state except North Dakota and West Virginia. The worst offenders are in Miami and Tampa, Fla. Miami has 46 times the per-capita rate of false refund claims than the rest of the country, and 70 times the national average in dollar terms.

With these crimes on the rise, two Texas A&M University-Corpus Christi Certified Public Accountants (CPAs) and Accounting Professors are offering  practical advice for CPAs and their clients to help stop tax identity theft. Dr. Valrie Chambers, Professor in the College of Business, and Dr. Rabih Zeidan, Assistant Professor in the College of Business, are teaching preventative actions and ways to correct problems after an identity thief has struck.

Chambers and Zeidan explain that tax identity theft occurs when someone uses a taxpayer’s personal information, which includes name and Social Security number, without permission to commit fraud on tax returns to claim refunds or other credits to which a taxpayer is not entitled, or for other crimes. Identity tax thieves will usually file a tax return as early as possible during the tax return season with a false identity with hopes to claim money.

“Thieves normally file early in the tax-filing season, often before the IRS has received W-2 or 1099 forms, to prevent information matching and avoid receiving duplicate return notices from the IRS,” said Chambers. “Sometimes, taxpayers discover they are victims of identity theft when they receive a notice from the IRS stating that more than one tax return was filed with their information or that IRS records show wages from an employer the taxpayer has not worked for in the past.”

Identity thieves gather information through phishing scams, dumpster diving, bank records, discarded tax returns, and other records containing personal and financial information.

“Taxpayers can protect their identities by masking social security numbers on documents, checking credit reports at the three major credit bureaus, securing their personal documents in the home, and properly shredding unwanted documents,” said Zeidan. “Never open

suspicious emails that ask for identification information. The IRS does not send unsolicited, tax account related emails and never asks for personal and financial information through email.”

Once a person suspects that they have been a victim of identity theft, they should immediately file reports with the Federal Trade Commission and the local police, close any affected bank and credit card accounts, notify the credit bureaus, and considering putting a credit freeze on the affected accounts. Identity theft can result in delays of legitimate taxpayers refunds, and problems for the taxpayer such as audit, fees, and other significant burdens.

Victims may also lose job opportunities, may be refused loans, education, housing or cars, or even get arrested for a crime which they did not commit due to the time and money spent to clear the individuals’ names, according to the National Taxpayer Advocate.

Chambers and Zeidan recently addressed the issue of the rising number of identity theft cases, in at the article “Stopping Tax Identity Theft: Practical Advice for CPAs and Clients,” which was published in February’s Journal of Accountancy. On Friday, Nov. 8, Zeidan and Chambers will present their findings to the Florida Institute of CPAs in Gainesville, Fla.