Tax identity theft is a growing problem within the United States, and it’s on the rise.

The Internal Revenue Service recently reported that it was currently involved in more than 450,000 cases dealing in identity theft.

While this may not seem significant to you, especially when the IRS processes around 145 million returns annually, it can cause some real problems if you are one of the unlucky ones.

Common ways for thieves to obtain personal information include e-mail or telephone phishing and Dumpster diving.

These individuals are looking for old tax returns, bank records, credit card statements, and other records containing personal/financial information.

If you still do not see this as a problem, the Treasury Inspector General for Tax Administration estimated that identity-theft-related fraud accounted for around $5.2 billion for the 2011 filing season.

There are many ways to prevent this from happening to you.

Some of the more helpful tips include:

1) Forward any document/e-mail to your CPA that appears to be from the IRS, and do not click on links or open attachments from e-mails claiming to be from the IRS.

2) Use a shredder to dispose of documents containing your personal information.

3) Secure your personal documents, such as copies of your income tax returns, in locked cabinets or safes.

4) Protect your personal computer by using firewalls and anti-spam or anti-virus software, updating security patches, and regularly changing passwords for all internet accounts with sensitive information.

If you become a victim of tax identity theft, here are some steps of what to do:

1) Report the theft to the Federal Trade Commission, at ftc.gov/complaint.

2) File a report with the police.

3) Immediately close any affected bank and credit card accounts.

4) Respond to all IRS notices immediately, using the name and number printed on the notice (again, I recommend you bring this to your CPA.)

If you are interested in learning more on tax identity theft or wish to hear some other suggestions, please contact me, and I will be happy to assist you.

 

J. Ryan WINGFIELD, CPA, CFE works as manager with Silas Simmons, LLP accounting firm in Natchez.