Someone Filed a False Tax Return in Your Name - Now What?

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By Kira Brecht

It's not just credit and debit cards that cyber hackers are after these days. Criminals are also using stolen personal information to file fraudulent tax returns and receive tax refunds.

Tax fraud has increased substantially in recent years, according to Federal Trade Commission identity theft data. In 2014, tax or wage-related fraud was the No. 1 consumer complaint in how an identity theft victim's information was misused. In 2005, tax fraud stood at 4.8 percent of overall complaints, but in 2014, it jumped to the largest category at 32.8 percent, according to the FTC.

"Cyber fraud, such as the breach at Anthem Blue Cross, may get all the headlines, but criminals are stealing your personal information in places where you'd least suspect it to happen," says Steve Ribble, CEO of the Guardian Accounting Group in Tampa, Florida.

Cyber Thieves Are Everywhere

Cyber thieves rely on all sorts of tactics to gain access to your personal information. A criminal just needs your name, Social Security number and date of birth to file a tax return, and falsified W-2 information to attempt to claim a refund. "In some instances, the criminal would take a job in a doctor's office and gain access to your private data. Another tactic is calling taxpayers, claiming to be from the IRS and trying to get personal information over the phone or trying to scare the taxpayer into making a payment for taxes they don't owe. This year, thieves were stealing W-2s right out of mailboxes and filing false tax returns," Ribble says.

No matter which way you file -- electronically or through mail -- you can be compromised. If you are e-filing, make sure your computer has the most up-to-date anti-virus software, and that you are filing from a secure connection, not a public Wi-Fi connection. And don't "file from a link in an email purporting to be from the IRS. They won't email you," says Becky Frost, senior manager of consumer education for Experian's ProtectMyID.

If you are mailing your tax return, there are precautions you should take as well. "Send from the post office or other secure carrier. Leaving sensitive postal items in an unlocked mailbox with the pickup flag up is not secure," Frost warns.

The first clue you will have if you are a victim comes when you file your tax return. If you e-file and your identity has been stolen, your return will be rejected by the IRS. If you originally mailed your tax return, you will receive a notice in the mail from the IRS stating that someone has already filed using your Social Security number.

If This Happens to You, Act Fast

"Acting quickly and alerting your financial institutions and the credit reporting agencies to the fraud can help stop thieves from opening new accounts. Thieves don't just use your information once -– they use it again and again. The faster you respond, the less time they have to do damage," Frost says.

Jeremy Morris, product manager at H&R Block, says you should contact the IRS Identity Protection Specialized Unit at 800-908-4490 and report the theft. The next step is to fill out Form 14039, the Identity Theft Affidavit, available at If you tried to e-file your return and it was rejected, you will have to mail in your tax return to the IRS.

Taxpayers may want to consider additional avenues, including reporting the fraud to the three major credit reporting agencies: Experian, TransUnion and Equifax. Also consider filing a police report and a complaint with the FTC, placing a fraud alert on your credit-report account and monitoring your credit reports for unfamiliar accounts or activity. Other steps:

  • Get an Identity Protection PIN from the IRS. This is a six-digit number created for eligible taxpayers to help prevent future fraudulent use of your Social Security number. If you have been a victim of identity theft, the IRS will send you a CP01F notice, inviting you to apply for a PIN. Also, if you live in Florida, Georgia or the District of Columbia -– areas with high rates of tax-return fraud -- you may apply on your own. In the future, you will use this PIN when you file your return. Any return filed without the proper PIN will be rejected by the IRS.

  • Be patient. It could take months to not only sort through this process, but to receive your tax refund. "Once you find out that your tax identity has been stolen, it can take six months or more to receive your refund," Morris says.

  • Protect yourself. Here's what you can do to help keep your personal information from being stolen: "Never leave your personal data lying around your house. Store it in a secure location, preferably a fireproof safe," Ribble says. "Never carry your Social Security card in your wallet or purse. You should be checking your credit card and bank activity statements on a monthly basis and report all suspicious activity immediately."

The IRS is acting to punish tax fraud criminals. In fiscal year 2014, the IRS initiated 1,063 identity theft-related investigations, and criminal investigation enforcement efforts resulted in 748 sentencings. "The IRS has been increasing the number and efficiency of identity theft filters and has been able to stop 14.6 million suspicious returns from being processed and saving approximately $50 billion in fake refunds from being paid," Ribble says.