Tax Law

Identity Theft: A Major Concern For Both Individuals And Businesses

Identity theft is an increasing problem that can potentially affect any individual or business. The IRS, FBI, and FTC have published information for individuals and businesses for the prevention, detection, and correction of identity theft.

In the past year, the IRS has published a substantial amount of information pertaining to this subject. The website contains a wealth of material on identity theft. [See Internal Revenue Service, "Taxpayer Guide to Identity Theft," retrieved from on 7/1/15.] The IRS's Tax Guide to Identity Theft contains facts on the definition of identity theft, warning signs of identity theft, steps to take if you are an identity theft victim, and ways to reduce your risk of identity theft. According to the IRS, tax-related identity theft is becoming more common. This is a situation where someone steals a taxpayer's social security number in order to file a tax return and obtain a fraudulent refund of income taxes. This is frequently done early in the tax filing season before the legitimate taxpayer has time to obtain all documentation and complete his or her return. During the past tax filing season, the IRS has sent numerous memorandums to tax preparers and taxpayers concerning this very important subject.

Tax refund fraud is a form of identity theft. The IRS is working more and more each year to combat this problem. A fraudulent filing requires a stolen Social Security Number. This can be from a lost wallet, data breach, hacking, or a phone or email scam. The common sense tips stated earlier can help to protect your SSN from being stolen. Warning signs of tax return fraud include more than one return being filed in your name, IRS records showing income or employment that is not accurate, or the cancellation of benefits due to an incorrect reporting of an income change. [Internal Revenue Service, "Identity Theft Information for Taxpayers and Victims" retrieved from on 6/4/15.] The IRS is able to prevent many of these return frauds. Between 2011 and October of 2014, the IRS has stopped 19 million suspicious returns which protected $63 billion dollars from being paid out to fraudsters. [Internal Revenue Service, "IRS Combats Identity Theft..." retrieved from on 6/4/15.]

As an individual, each taxpayer must be careful to protect their own information to prevent fraudsters from misusing it. Many frauds involve the fraudster impersonating an IRS official. The IRS warns that it will never demand immediate payment without sending a bill first, refuse to allow you time to question what they say you owe, ask for credit card numbers over the phone, or threaten to bring in local police. [Internal Revenue Service, "Phone Scams Continue to be Serious Threat..." retrieved from on 6/4/15.]…

… [B]usiness identity theft involves the unauthorized use of a business' information for personal gain. Owners of a timber business should be on guard not only to protect their own information but also that of their company and employees. Warning signs, similar to warning signs as an individual, include receiving IRS notices about fictitious employees and being notified after filing of the IRS accepting an amended return when you had not previously filed. [Internal Revenue Service, "Tax Practitioner Guide to Business Identity Theft" retrieved from on 6/4/15.]…

Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.

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