3 Things You Must Immediately Do As a Victim of Income Tax Identity Theft

By Markets Fool.com

Tax identity theft happens when someone uses a stolen Social Security number to file a return and claim a refund. Unfortunately, it's not hard to do. A criminal only needs the targeted person's name, Social Security number, and birthdate. Because names and birthdates are easy to come by, protecting one's Social Security number is that much more important.

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If your tax identification is compromised, there are three things you should do right away to mitigate the damage.

Notify the authorities
If you find that someone is trying to file an income tax return under your name, notify the police immediately because you will need the incident to be filed in a police report. Next,notify the IRS, the Social Security Administration, and the Federal Trade Commission as soon as possible. Time is of the essence, and quick action can help prevent any potential damage from escalating. To notify the Federal Trade Commission, file a complaint online at identitytheft.gov. If you filed taxes electronically, you can submit the Form 14039, also known as an Identity Theft Affidavit. This form serves as a notification to the IRS that you believe your identification has be compromised in some way and that review of suspicious activity is needed. You can submit this form along with your tax filing, however if you realize that your tax ID was compromised after you already filed your taxes, you can submit the form to the same location you would normally file your tax return. In the case of data breaches, the Form 14039 should only be filed under two conditions, (1) you suspect your Social Security number was compromised and your electronic filing was rejected as a duplicate filing, or (2) you were informed by the IRS that your identity was stolen.

Place a fraud alert on your credit report
Contact one of the major credit bureaus -- Equifax, Experian, and TransUnion -- to place a fraud alert on your credit report at no charge. Once you place the alert, the bureau you chose will notify the others. The alert will remain on your report for at least 90 days, but you can always renew it. Keep a record of all the letters, emails, or calls you make in regard to the incident.

You can also place a security freeze on your credit report, which will prevent unauthorized access. This freeze will remain active until you instruct the credit reporting company to remove it.

Contact your financial institution(s)
In addition to reviewing all of your debit and credit card statements to dispute any suspicious transactions, talk to your bank and any other financial institution where you have an account. You may need to lock down some accounts or even open new ones. Creating new accounts involves paperwork and certain documentation, but sometimes it's the best way to shut down scammers. If your bank account has been compromised, ask for copies of the documentation used to open an account in your name. This can help trace back to the culprit.

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Going forward
If you do fall victim to tax ID theft, you should still file your income taxes. Suspicion of a compromised Social Security number or any other type of tax-identity fraud is no excuse to delay. Keep tabs on any correspondence you have with the IRS or any other government authority, as you want to be quick to follow up on their requests or instructions. But be patient, as these cases can go on for six months or more before the IRS provides a resolution.

Even if you haven't had your identity stolen or misused, it's wise to implement preventative measures. Visit your state's tax agency's website to learn how your state's security standards may affect you. You may want to sign up for credit monitoring services, which some companies offer free of charge. Occasionally reviewing your credit report for accounts opened in your name without your knowledge is always a good idea, and keep in mind that you're entitled to a credit report each year from each of the three major credit bureaus, also free of charge. Also be sure to use strong passwords on your online accounts, and change them regularly.

This all might sound like a hassle, but it can save you a lot more hassle in the long run.


The article 3 Things You Must Immediately Do As a Victim of Income Tax Identity Theft originally appeared on Fool.com.

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