What is Tax Identity Theft and How Can You Stop It?

Tax identity theft is a real threat. SecurelyID protects you and your clients.

The following article was written by The Editorial Staff at SecurelyID and contributed for use on the TaxSlayer Pro blog. 

As a tax professional, every filing season, you bring the full power of your knowledge and expertise to make sure that your customers get the tax education and maximum refunds they deserve – but are you remembering to include this one very critical service? In this article, we’ll cover the basics of the growing crime of tax identity theft, highlighting how it happens and how your customers can fight and resolve it.

The season of stolen information

Every year, while millions of Americans rely on preparers like you to file their taxes, identity thieves follow suit in the shadows to cash in by filing false tax returns with stolen customer information. Tax identity theft has become so problematic that it now accounts for up to 12% of the top five types of fraud reported to the FTC.1   It’s so common that every year, the IRS releases a list of top scams called the “Dirty Dozen,” with many of them being used to steal money from taxpayers. At the top of 2019’s Dirty Dozen list was phishing, when is when thieves steal customer data through email, text, or instant message pretending to be a trusted company.

What is identity theft?

Tax identity theft happens when someone uses a customer’s personal information, such as their W-2 form or Social Security number, to file a fake tax return to steal their refund. 

How do you know when tax identity theft has happened?

Unfortunately, like the perpetrators who commit the crime, tax identity theft lurks in the shadows, only to be detected when a taxpayer tries to file their tax return and it gets kicked back. Only then does the real taxpayer discover that someone else has already filed a falsified return. To make matters worse, fraudsters typically request a rapid refund to receive money from the tax professional before the IRS has a chance to pay it out directly. 

What does it take to respond to tax identity theft?

There’s no getting around it; tax identity theft is a total violation of your customer’s privacy and peace of mind. Even more taxing, the process to resolve it can be complicated and painful. If hackers get their hands on your customer’s data and commit tax identity fraud, it will take time and resources to get back on track. Here’s what it entails:

  1. Resolving tax fraud takes time: If identity thieves forward your customer’s mail, they must work with the U.S. Postal Service to cancel the unauthorized change of address redirection, which will require communication and follow up. They will also have to work with the IRS, which is never a quick process.
  2. Most likely the identity theft will strike from other places: To monitor their credit reports for other identity theft signs, your customers should freeze their files with all three major credit bureaus. If their information was stolen and used for tax identity theft, it could mean that more of their data is vulnerable.  
  3. It can be expensive: Many customers count on their tax refunds to pay bills and take care of other responsibilities. If their refund is stolen, getting their money back could take months, and that’s if they can recover their losses.

How can you help customers fight and resolve tax identity theft?

When tax identity theft strikes, your customers need a plan. You can make sure they have one with SecurelyID. SecurelyID allows your customers to monitor and restore their identity with nine powerful Identity Monitoring and Identity Restoration features, including Social Security Number Trace, Internet Surveillance, Full-Service Restoration, and up to $1M of Identity Theft Insurance.

In addition to signing up for Securely ID, there are steps your customers can take to prevent tax identity theft from happening in the first place. Here are seven:

  1. File early. By filing taxes before an identity thief, customers can likely avoid a rejected return.
  2. Screen, screen, and screen again. Customers should be wary of people connecting with them pretending to work for the IRS, a common trick fraudsters use to collect personal data.
  3. Send W-2s and any other bills with personal information digitally.  

When your customers sign up for SecurelyID, they get more than identity monitoring and identity restoration; they get a low-cost solution to fight and resolve identity theft.  

To learn more about selling Securely ID, log into Account Hub.

1Source: Federal Trade Commission, Consumer Sentinel Network.