Tax Identity Theft: Protect Your Finances and Recover with Confidence

April 15th is Tax Day, leading to more than 213.3 million tax returns and other forms filed electronically each year. With increasing advancements in the digital age, identify theft has increased significantly. U.S. Department of Justice estimates “1 in 10 persons have been victims of identity theft in the past 12 months.”   

There are Several Types of Identity or ID theft:

Financial Identity Theft – When your bank or credit cards are stolen to withdraw money or make purchases, or your Social Security number illegally used to open a new card.

Medical Identity Theft – When your personal information is used to receive healthcare in your name.

Employment Identity Theft – When your personal information is used to get a job or pass a background check.

Child Identity Theft – When credit accounts are opened using a child’s information.

Estate Identity Theft – When the personal information of a deceased person is used to steal money or open accounts.

Criminal Identity Theft – When someone who has made contact with law enforcement, for example, by being pulled over or arrested, provides your personal information, instead of theirs.

Tax Identity Theft – When your personal information is accessed to file a tax return and get a refund.

What is Tax Identity Theft?

‍‍Tax identity theft occurs when someone files a tax return using your Social Security number, in hopes of stealing your tax refund. Victims of tax-related identity theft usually only find out about it when they file their annual taxes and discover a return has already been filed, receive a letter from the Internal Revenue Service (IRS), or records show wages from an employer they do not know or do not work for. 

How Does Tax Identity Theft Work?

Here’s how tax identity theft works: It’s really all about timing. January 31st is the deadline to distribute Forms W-2 to employees(s), but it takes some time for taxpayers to gather the paperwork required to file taxes. This includes W-2s, 1099s, mortgage interest statements, property tax records, childcare expenses, retirement contributions, and income from sales of stock or cryptocurrency. Factor in finding the time in their busy life like work, family get-togethers and household responsibilities, many people wait until the April 15th deadline to file.

Since many people wait until April to file their taxes, a criminal who has accessed compromised personal information (such as a Social Security number, full name, and street address) takes advantage of the delay and files in someone else’s name. The scammer then receives a refund, cashes it, and the legitimate taxpayer finds out they are a victim of tax identity theft when the IRS will not process their claim because a claim has already been processed in their name.

Protect Your Identity‍

Protect your personal information and stay ahead of identity thieves by following these tips:

File as Soon as Possible‍

Once you have received all the necessary paperwork, file right away. In doing so, a thief cannot file a return in your name if you have already filed a legitimate return.

File Safely and Securely

Use a trusted service when filing your taxes, whether it is online or in person to protect yourself from tax identity theft.

Protect your Social Security Number

• Only give out your personal information when you must. There are a lot of places requesting your SSN on intake forms like in a doctor’s office, but it not required.
• You are only required to provide your Social Security number to:
  • File taxes
  • Start a job
  • Open a bank account
  • Apply for a loan
  • Get a passport
  • Claim government benefits
• Be sure to ask why your SSN is needed, how it will be used, and where and how it will be stored.
• Protect your Social Security card and keep it in a safe, secure place at your home. Only carry it when it is required to provide it.
• Secure your account by always using security software, including firewall and antivirus protection, and strong, complex passwords.
• Get an identity protection PIN (IP PIN), a six-digit number that prevents someone else from using your SSN to file a tax return. The IP PIN is only known to you and the IRS.
• Know the IRS will not initiate contact with you via email, text message, or social media message. If you receive an email that claims to be from the IRS, forward it to phishing@irs.gov.

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What to do if Your Social Security Number is Stolen

When someone has filed a tax return using your Social Security number, you should receive a letter from the IRS. Respond immediately to any IRS letter and call the Taxpayer Protection Program (TPP) phone line at 800-830-5084.

If you don't receive a letter and still suspect a fraudulent return has been filed with your personal information, there are steps you can take: Visit the identitytheft.gov website, to report identity theft to the Federal Trade Commission (FTC) and get help making a recovery plan.

What are Other Ways, You Can Protect Yourself?

Edison Insurance Company offers additional coverage to your homeowners insurance policy called, Identify Theft Expense and Resolution Services Coverage for as little as $25 a year. This endorsement will reimburse you for up to $25,000 for expenses incurred to restore your credit, as well as, provide you with "resolution services" from a consumer fraud specialist who will assist you in the process of restoring your identity and your credit to the level it was prior to the breach.

What Expenses are Covered?

ID theft insurance policies usually cover:

• Costs for notarizing fraud affidavits, sworn statements, or similar documents required by financial institutions.

• Costs for certified mail to law enforcement agencies, credit agencies, financial institutions, or similar credit grantors.

• Lost documented wages from an employer as a result of time taken off from work to meet with, or talk to, law enforcement agencies, credit agencies and/or legal counsel, or to complete fraud affidavits regarding your identity theft.

• Attorney fees incurred regarding identity theft such as for the defense of lawsuits brought by merchants or their collection agencies and removal of any criminal or civil judgments wrongly entered.

• Loan reapplication fees if your first application was rejected due to fraud.

Keeping Your Family and Home Safe and Protected is Edison Home Insurance Company's Number One Priority

At Edison Insurance Company, we have taken a bright and innovative approach to FL homeowners insurance with coverage options allowing you to customize a policy to best fit your needs. Ask your Edison agent about identity theft protection today. To explore your home insurance options with us, get a quote now call us at (866) 568-8922.