Tag Archives: tax fraud

Dealing With Identity Theft

Occasionally bad things happen to good people.  Despite all of our efforts to secure that data which is so precious to us, sometimes it winds up in the wrong people’s hands.  Where do you begin when you think that you may be susceptible to, or worse the victim of, identity fraud?  Read on to find out some of the critical first steps that one should take.

Notify credit bureaus and establish fraud alerts.  If you have credit cards, the first stop is to report the situation to the fraud department of the three credit reporting companies – Experian, Equifax, and TransUnion.  When you notify one bureau that you are at risk of being a victim of identity theft, it will notify the other two for you.  Placing the fraud alert on your file means that it will be flagged and that creditors are required to call you before extending credit.  The initial alert is valid for only 90 days, however you can request that it be extended to 7 years.   You must have evidence of attempts to open fraudulent accounts and an identity theft report (police report) to establish the seven-year alert. You may cancel the fraud alerts at any time.

Contact banking institutions.  If your ATM or debit card has been stolen or compromised, report it immediately.  ATM and debit card transactions are subject to the Electronic Fund Transfer Act (15 USC §1693). Even if you are a victim of identity theft, your liability for charges can increase the longer the crime goes unreported. For more on EFTA and your liability for fraudulent use of your ATM/Debit Cards, see the following  FTC guide.  If you have had checks stolen or bank accounts set up fraudulently, ask your bank to report it to ChexSystems, a consumer reporting agency that compiles reports on checking accounts. Also, place a security alert on your file

Dealing with brokerage accounts.  You do not have the same protections against loss with brokerage accounts as you do with credit and debit card or bank accounts. The Securities Investor Protection Corporation restores customer funds only when a brokerage firm fails. If an identity thief or other fraudster targets your brokerage account, refer to your account agreement for information on what to do.  Immediately report the incident to the brokerage company and notify the Securities and Exchange Commission.  Also notify the Financial Industry Regulatory Association. To protect against fraud, put a password on each of your investment accounts.

Social Security number (SSN) misuse.  The Social Security Administration (SSA) does not in most cases provide assistance to identity theft victims. But be sure to contact the SSA Inspector General to report Social Security benefit fraud, employment fraud, or welfare fraud.

  • Social Security Administration online complaint form: www.socialsecurity.gov/oig
  • SSA fraud hotline: (800) 269-0271
  • By mail: SSA Fraud Hotline, P.O. Box 17768, Baltimore, MD 21235

 SSN misuse and tax returns.  If you are a victim of tax-related identity theft (or a potential victim because someone has wrongfully obtained your Social Security number), you must file Form 14039, Identity Theft Affidavit, with the IRS.   Once the form is filed and your identity verified, then the IRS will send you IRS Letter 4869CS, which will provide you with a six-digit identity protection personal identification number (IP PIN) and instructions for its use.  For electronic returns, the software will indicate where to insert the IP PIN.  For paper returns, enter the IP PIN in the six boxes to the right of the spouse’s occupation in the signature section.

Unlike your SSN, the ID PIN is not a permanent identification number. Rather, it is like the security code found on the back of most credit cards. The ID PIN you receive in one year will be valid only for returns filed for that tax year.   For more information on what to do with tax identity theft, please refer to this one page guide.

Keep good records and monitor your credit files. In dealing with the authorities and financial companies, keep a log of all conversations, including dates, names, and phone numbers.  Note the time you spent and any expenses incurred in case you are able to seek restitution at a later date. You may be able to obtain tax deductions for theft-related expenses (consult your accountant).   Make sure you confirm all conversations in writing and send correspondence using certified mail with return receipt requested.   Keep copies of all letters and documents and actively monitor your credit files going forward.  If you need times on organizing your case check out these helpful sites:

FTC’s guide Take Charge

Identity Theft Resource Center