If your identity is stolen, your finances can quickly
become a nightmare. A less obvious problem is the effect identity theft
can have on your taxes.
Identity Theft
Generally,
thieves steal your personal data for the purpose of running up credit
card charges or opening and abusing new accounts. A developing trend in
the identity theft field concerns schemes impacting your taxes.
Selling Social Security Numbers
Identity
thieves have created a new line of business – selling your social
security number. Who would want to buy it? The list is surprising long,
but undocumented workers, individuals with bad credit and people trying
to obtain a new identity lead the list. This can create a huge problem
for you since any income paid to those individuals is reported to the
IRS as being paid to you. This results in the IRS having inflated income
numbers and, often, audits when you “under report” your income.
With
the creation of the Real ID Act, better known as the National ID Card,
things will only get worse. Under the Act, all workers will be required
to submit social security numbers to obtain jobs. With our leaky
borders, there will be a high demand for your social security number.
False Tax Filings
It
doesn’t take much to file a tax return. What’s to stop an identity
thief from filing one under your name to generate a refund? Nothing. To
generate the maximum refund, you can be all kinds of frivolous
deductions will be claimed. After all, it will be you that has to attend
the audit.
What Can I Do?
If
you receive a notice from the IRS that leads you to believe someone may
have used your Social Security Number fraudulently, you should notify
the IRS immediately. Indicators can be found in notices from the IRS
that state:
1. More than one tax return for you was filed, or
2. IRS records indicate you received wages from an employer unknown to you.
Don’t
hesitate or be nervous about contacting the IRS. The agency knows this
is a growing problem and not an “opportunity” to pound on taxpayers.