Guarding Against Tax Identity Theft
The close of 2024 may have many people focused on the past year’s activities, and may not have filed their most recent income tax return. However, it’s a good idea to start thinking about it. Tax identity theft remains a significant problem, costing the government billions of dollars annually and potentially delaying legitimate tax refunds. According to the Taxpayer Advocate Service, victims can experience delays of up to 675 days in receiving their refunds.
Despite improvements by the IRS, criminals continue to use identity theft to file fraudulent returns using stolen Social Security numbers and counterfeit W-2s.
One example highlights the severity of this crime: Abraham Yusuff, the leader of an identity theft ring that stole $30 million in fraudulent tax refunds, was sentenced to over 14 years in prison. Six other members of the gang had already been convicted and sentenced.
The Vulnerability of Your Social Security Number
Your Social Security number (SSN) is required for several important processes, such as applying for credit or loans. However, many businesses also request your SSN for identity verification. The problem is, your SSN’s privacy is only as secure as the cybersecurity of the companies that store it. Unfortunately, many companies are not so great in protecting your data.
Taking Control: Protecting Your Information
Just as Nancy Reagan advised, it’s wise to say “no” when asked for your SSN by organizations that don’t truly need it. While there’s no law preventing companies from asking for your SSN, they are within their rights to deny services if you refuse to provide it.
Understanding the Threat
Tax identity theft is relatively easy. All it requires is the name and Social Security number of the victim. Cybercriminals often gather personal information through data breaches and sell the stolen data on the Dark Web.
Proactive Steps to Protect Yourself
To protect yourself:
- File Early: Submit your tax return as early as possible to prevent identity thieves from filing first.
- Get a PIN: Obtain an Identity Protection PIN (IP PIN) from the IRS. This six-digit code adds an extra layer of security, protecting your information if your SSN has been compromised.
Obtaining an Identity Protection PIN
The IRS’s Identity Theft Protection PIN program expanded in 2022 to provide individual taxpayers with a six-digit code required on tax returns. This code helps protect your information if your Social Security number has been compromised from being used by identity thieves, because they won’t known the code.
To apply for a PIN, visit the IRS website: Get an identity protection PIN | Internal Revenue Service
The PIN is valid for one year and must be obtained annually. Once you’ve obtained a PIN, retrieve your new PIN via your IRS online account, it is usually available starting in January. Victims of tax identity theft who have filed an identity theft affidavit with the IRS are automatically sent a PIN by mail.
