I’m sure you are aware of the serious problem of identity theft in our country today. We hear stories of it every day. We are rightly concerned about the theft of our important data stored by vendors, banks and government agencies.
But many of you may not be aware of the problem from the perspective of filing your taxes.
Identity theft is the biggest complaint received by the FTC (Federal Trade Commission). In 2010 about 15% of complaints dealt with tax returns. Now that number is 43%.
At a recent educational event I attended, the presenter talked about this growing problem. Our presenter was a former official in the IRS and is now in private practice. He suggested that identity theft is the biggest fear of the IRS. He said that this problem is costing us billions of dollars.
It is vital that you protect your identity when filing your tax returns. If your identity is stolen and a fraudulent return is filed, you will probably wait at least 180 days before you see your refund money.
This problem was brought home to me last filing season. A client discovered that his daughter’s tax returned was rejected because it had already been fraudulently filed. The matter was eventually resolved (she did receive her refund) but only after many weeks of calls and letters.
What is causing this?
There are many factors but the two largest are 1) Electronic filing of tax returns, and 2) Refundable tax credits.
I was at the birth (1991 in Indiana) of the electronic filing movement. I immediately saw the increased productivity available with this new internet based means by which to file tax returns. However, many times blessings are accompanied by curses. The problems of Internet theft extend even to the IRS.
The second factor is the motivating factor. Quite frankly, if the government was not trying to give away so much of your money to so many people, there would be very little reward for fraudulent tax filing.
I remember just a few years ago when the government wanted to credit thousands of dollars for the purchase of a new home. In the first year of this program, NO documentation was required!!! No closing statement. No deed. No Nothing! Would it surprise you to learn that billions of dollars were wasted on giving thousands of dollars to people who actually did NOT buy homes? And, many were not even the real people filing the tax return?
All refundable credits-child credit, earned income credit, tuition credit-are incentives for people to steal. These credits may be politically/economically the right thing to do, but clearly, some other means of receiving these credits needs to be created to thwart the growing problem of fraudulent tax return filing.
Protect yourself. Protect your identity. If you do experience identity theft in the filing of your tax returns, call us. We can help retrieve your money.