IRS flagged more than 1 million tax returns for identity fraud in 2023

The IRS flagged greater than 1 million tax returns for potential id theft through the 2023 tax season, in accordance with the U.S. Division of the Treasury, signaling that such fraud continues to be a pervasive drawback for taxpayers.

Tax-related id theft happens when criminals use a taxpayer’s private data to file a return of their identify to say their federal tax refund.

The IRS recognized almost 1.1 million tax returns as probably fraudulent as of March 2, in accordance with a Treasury report issued to the general public Tuesday that analyzed information partway by means of the submitting season. The related refunds had been price about $6.3 billion.

The IRS had confirmed 12,617 of the tax returns had been fraudulent as of the identical date in March, Treasury reported. That determine is up from 9,626 tax returns on the similar time in 2022.

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Tax-related id theft has been an issue since about 2004-05, and it “solely bought worse” since then, mentioned Nina Olson, government director and founding father of the Middle for Taxpayer Rights.

“It went from being a one-off [thief] ripping off somebody’s Social Safety quantity to an entire scheme and arranged crime,” Olson mentioned.

Id theft was probably the most prevalent kind of fraud that customers reported to the Federal Commerce Fee in 2022. A report issued Wednesday by the Id Theft Useful resource Middle discovered that id crime declined in 2022, however solely marginally from the all-time excessive hit in 2021.

The IRS elevated the variety of filters it makes use of to establish probably fraudulent tax returns for the reason that 2022 tax season. The company used 236 filters through the current tax season, in contrast with 168 filters final 12 months, Treasury mentioned.

Tax returns recognized as fraudulent by these IRS filters are held throughout processing till the IRS can confirm the taxpayer’s id.

“They’re attempting to crack down … to be sure you’re [the one] truly submitting,” mentioned Dan Herron, a licensed public accountant and licensed monetary planner based mostly in San Luis Obispo, California.

Generally, the system inadvertently catches returns that are not fraudulent, although.

One among Herron’s new shoppers had been submitting a paper tax return yearly with a unique accountant however filed an digital return in 2023. The consumer obtained an IRS discover within the mail saying that the return had been flagged for fraud. The consumer needed to contact the company to confirm their id — delaying the issuance of a tax refund by a number of weeks, Herron mentioned.

“It isn’t an ideal system, however it’s entering into the appropriate route,” Herron, founding father of Elemental Wealth Advisors, mentioned of the IRS programs.

Taxpayers might not know they’re the sufferer of tax-related id theft till they attempt to file a return on-line and study {that a} return was already filed utilizing their Social Safety quantity. The IRS may additionally ship a letter saying it recognized a suspicious return utilizing your SSN, for instance, amongst different telltale indicators.

Taxpayers can nonetheless declare a refund if this occurs. However they will need to take extra steps to show their id to the IRS, and their refund will doubtless be delayed in consequence.

Maybe one of the best ways for taxpayers to stop id theft is to request an Id Safety Private Identification Quantity (IP PIN) instantly from the IRS, Olson mentioned.  

The IP PIN is a six-digit quantity assigned to eligible taxpayers initially of every submitting season. It is identified solely to the taxpayer and, as soon as issued, is required when submitting a tax return as an authentication measure.

A tax return filed by a scammer with out the related IP PIN wouldn’t be processed, Olson mentioned. She recommends taxpayers who need an IP PIN request one within the latter a part of the calendar 12 months, forward of the tax season, and that they preserve it useful.

The IRS issued 802,449 complete IP PINs to taxpayers as of March 4, in accordance with the Treasury’s report.

Taxpayers may also cut back their danger by attempting to file a return early within the tax season, consultants mentioned. The IRS additionally recommends a number of on-line safety measures tied to computer systems and cellphones, digital passwords, multifactor authentication and avoiding suspicious e-mail hyperlinks or attachments.

The IRS additionally by no means initiates contact with taxpayers by e-mail, textual content or social media to request private or monetary data, and by no means calls to threaten lawsuits or arrest, the company mentioned.

The IRS recommends victims of tax-related id theft take a couple of essential steps:

• Full IRS Kind 14039, Id Theft Affidavit, in case your e-file return is rejected due to a reproduction submitting utilizing your Social Safety quantity. Proceed to pay your taxes and file your tax return, even when it have to be by paper. Connect the id theft kind to your paper return.
• Reply instantly to any IRS discover.
• File a criticism with the FTC at identitytheft.gov.
• Contact one of many three main credit score bureaus (Equifax, Experian or TransUnion) to put a fraud alert in your credit score data.
• Shut any monetary or credit score accounts opened by thieves.