A New Identity Theft Fear: Getting Your Tax Refund Stolen

Originally published on San Gabriel Valley Tribune, February 24 2016.

Tax-refund fraud caused by identity theft is one of the biggest challenges facing the Internal Revenue Service.

Identity theft is nothing new.

Most consumers are aware of the massive security breaches that have occurred at companies like Target, Home Depot and Sony. And those who have been victims of personal ID theft know the aggravation that comes with sorting out the bogus charges on their credit cards, calling the bank and getting the charges removed.

But hackers have found yet another way to bilk people — by stealing their tax refunds.

How to protect yourself from identity theft, including from having your tax refund stolen.

Tax-refund fraud caused by identity theft is one of the biggest challenges facing the Internal Revenue Service. A Government Accountability Office report released last year noted that the IRS blocked $24.2 billion in fraudulent refunds requested in 2013, although the agency still paid out $5.8 billion.

But progress has been made.

In calendar year 2015 through November, the IRS rejected or suspended the processing of 4.8 million suspicious returns. As of last month, it stopped 1.4 million confirmed ID theft returns totaling $8 billion.

“It basically happens when you’re unsafe with your information,” said Michael Atias, tax director at Online Trading Academy, an Irvine-based business that provides financial education for traders and investors. “When you go online and use the same password for everything, like a birthdate ... or a birthdate with a different combination, it’s not hard for someone to figure it out. There are many ways criminals can get your information.”

Atias said taxpayers should be wary of possible identity theft if they receive an IRS notice or letter that says more than one tax return was filed using their Social Security number.

Consumers who are told they owe taxes or will have collection actions taken against them for a year in which they didn’t file a tax return should likewise be suspicious. Other taxpayers have been told that they received wages from unknown employers.

“Tax fraud is something we deal with every filing season,” IRS spokesman Raphael Tulio said. “We put out a ‘Dirty Dozen’ list of scams each year that the public needs to be vigilant about and identity theft topped the list again.

We’re just trying to get out in front of it.” Last year the IRS, the states and the tax industry formed the Security Summit Group, which has been working to come up with new ways of protecting taxpayers and safeguarding the tax system.

“Increasingly, these crimes are being perpetrated by sophisticated, organized syndicates,” IRS Commissioner John Koskinen said in a recent statement. They’ve been able to gather almost unimaginable amounts of personal data from sources outside the IRS. They use this data to file fraudulent federal and state tax income returns, and claim huge refunds.”

Criminals are stealing more and more personal data, he said, and they’re getting better at making their bogus tax returns look legitimate. It’s created a big challenge for both the IRS and state taxing authorities.

An estimated 150 million households file federal and state tax returns involving trillions of dollars each year and those returns involve important and sensitive personal data. More than 90 percent of the tax returns are prepared on a laptop, desktop or even a smartphone, Koskinen said, whether they’re done by the taxpayer or a tax preparer.

“This is a massive amount of sensitive data that identity thieves would love to get access to,” he said. “We want to make it harder for these criminals to succeed, and to do that, everyone needs to be actively safeguarding their personal data, whether on their personal devices or in their personal interactions.”

The IRS issued a consumer alert last week after seeing a nearly 400 percent surge in phishing and malware incidents so far this tax season.

Taxpayers often receive an official-looking email from what appears to be an official source, whether it’s the IRS or someone in the tax industry.

The underlying messages often ask taxpayers to update important information by clicking on a web link. The links may be masked to appear to go to official pages, but they frequently go to a scam page designed to look like the official page.

The IRS is urging people not to click on these links, but to instead send the email to phishing@irs.gov.


  • File taxes early to avoid the chance of someone filing a return on your behalf.
  • Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with. The IRS does not call people and ask for their information. They always communicate by mail first.
  • Don’t carry your Social Security card or any documents that include your Social Security number.
  • Don’t give a business your Social Security number or Individual Tax Identification Number just because they ask. Give it only when required.
  • Check your credit report every 12 months.
  • Secure personal information in your home.
  • Protect your personal computers by using firewalls and anti-spam/virus software, and changing passwords for Internet accounts.

-Tips courtesy of Michael Atias, tax director of Online Trading Academy in Irvine.

Get more information about the services provided by Michael Atias and the team at OTA Tax Pros.

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