Tax return theft is an issue that more Americans are facing each tax season. A growing percentage of tax refunds are stolen, so knowing how to keep your personal information safe is important if you want to avoid this frustrating and time-consuming problem. In fact, according to the U.S. Department of the Treasury, refund theft affected over 1.5 million tax returns, with potentially fraudulent tax refunds totaling in excess of $5.2 billion. Furthermore, the IRS could issue $21 billion in tax refunds resulting from identity theft over the next five years.
Fortunately, there is a simple and free way to protect yourself through IRS tax Form 8821, according to a recent CBS Money Watch article.
How Does Form 8821 Keep Your Personal Information Safe?
Tax return theft works like this: An identity thief steals personal information from a taxpayer and files a fraudulent return in his or her name with a different address. The refund from that return is then deposited to a debit card, which is typically untraceable.
According to the New York Times ‘Your Money’ blog,
“The fraud is possible in part because the I.R.S. currently processes refunds as quickly as possible, and matches up the necessary verifying information later. Most employers, for instance, must provide income information to workers on forms W-2 and 1099 by the end of January. But the employer doesn’t have to file the same information with the federal government until the end of March. So when you file your tax return, the agency doesn’t necessarily have your income information from your employer for immediate comparison.”
The way Form 8821 works is by essentially acting as a canary in a mineshaft, warning of danger. The tax information authorization form allows the government to send copies of all communication between a taxpayer and the IRS to an appointed party.
That way, if the IRS has any correspondence with a refund thief, a copy of their correspondence is sent to the taxpayer. As soon as the taxpayer reads the letter, they know their identity has been compromised.
However, the form will not stop a fraudster from filing a false claim, but if for any reason the IRS finds a problem with the fraudster's return, they will send a notice to the fake address on the tax form and a copy of that letter will also be sent to your home address. This will alert you to any issues, at which time you should contact the IRS immediately to voice your concerns.
Other Ways to Prevent Tax Return Theft
- File Early: Thieves hurry to file early so that the fake return is the first one received by the I.R.S. This indicates that filing your return as early as possible may reduce the chances of a successful fake filing.
- Adjust Your Withholdings: Adjusting your tax withholdings so that you get a small refund or even owe a little means that your large refund won't be at risk for return fraud.
- Protect Your Social Security Numbers: Identity theft often hinges upon acquisition of your SSN, which may be pilfered from places like doctor’s offices and hospitals, schools and elsewhere. Always ask why the number is necessary, whenever it’s requested.
Ask For Help with Tax Return Theft and Other Tax Issues
Dealing with complicated tax and IRS issues can be a daunting and scary process, but you don't have to deal with these issues alone. An experienced tax and IRS lawyer at Suburban Legal Group PC can help you get the legal representation you need. We can help with IRS Audits, IRS Appeals, Federal Refund Litigation, Tax Court Petitions, Tax Liens, and more.
DISCLAIMER: All information on this website are provided for informational purposes only and are not intended to be construed as legal advice. Suburban Legal Group PC shall not be liable for any errors or inaccuracies contained herein, or any actions taken in reliance thereon.