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How Identity Thieves Can Steal Your Tax Refund

If you find yourself waiting longer than usual for your income tax refund this year, it could be because an identity thief has already claimed it. Tax related identity theft is the fastest growing form of ID theft, according to a 2011 Scripps Howard News Service investigation. Analyzing over 1.4 million identity theft records from the Federal Trade Commission, the Scripps study found that tax return related ID theft more than tripled – rising from 11,010 complaints in 2005 to 33,774 complaints in 2009.

According to the study, after one man had his $6,000 tax refund hijacked by an identity thief, it took him eight months to recover it from the IRS. The thief was never apprehended.

Identity thieves have stolen millions of dollars by filing fraudulent returns with the names and personal information belonging to other people. They can trick victims into disclosing their Social Security numbers by posing as the IRS in phishing emails or on fake websites. They can access the same sensitive tax information transmitted over unsecured wireless networks at home or at wifi hotspots.

In 2011, the Sun Sentinel reported that 31 firefighters in Oakland Park, Florida discovered that their identities had been stolen when they filed their tax returns and learned that their refunds had been mailed to a different address.

One warning sign that you may be the victim of tax related identity theft: getting documents in the mail showing income credited to you that you’ve never earned. Another red flag: after filing your return, you get a letter from the IRS saying that it already has your return.

The Treasury Inspector General for Tax Administration has many cases of tax related identity theft on its website. The most shocking one is a New Jersey man sentenced to two and a half years in prison for filing hundreds of fraudulent tax returns using the names of over 300 people in 11 states.

According to the IRS, last year 99 million taxpayers filed their returns electronically. That means anyone who gets access to your Social Security number and your W-2 could e-file your return and have your refund mailed to another address.

That’s what’s happening across the country. Here’s what you can do to stop identity thieves from getting your tax refund.

If you use online tax preparation software to file your return, don’t use it on any unencrypted public wifi connection They’re a favorite hangout for hackers looking to harvest your passwords, credit card numbers and other sensitive information.

Whether or not you file online, securing your tax information means securing your computer. Make sure your firewall is turned on and your antivirus software is up to date. Run an antispyware program often.

Make sure your home wireless Internet connection is protected with a strong network passphrase containing a minimum of eight letters, numbers and characters that’s difficult for others to guess.

Beware of phishing emails and websites that look as if they originate with the IRS or legitimate tax preparation companies. The tip-off: they will ask you for sensitive information those organizations never request online. The IRS doesn’t initiate contact via email.

Never download or open attachments claiming to be from the IRS. If you need any tax information, go directly to the IRS.gov website.

Don’t use search engines to look for government documents. Cybercriminals are using black hat SEO (search engine optimization) techniques to hijack federal tax forms keywords in order to deliver malware. Go directly to federal and state government sites if you need tax information or documents.

Once you’ve filed your taxes, move all your tax files to a removable storage device like an external hard drive or a USB key. Then erase all your tax data from your hard drive. That keeps it out of the reach of data thieves should your computer become infected with malware.

Use a VPN (virtual private network) like PRIVATE WiFi™ to protect your online privacy. PRIVATE WiFi encrypts the data transmitted to and from your computer, which makes it invisible to hackers.

For victims of tax related identity theft, the IRS Identity Protection Specialized Unit marks affected accounts so that cases can be resolved faster. The number to call is (800) 908-4490.

The IRS also has a free Taxpayer Advocate Service that helps people resolve disputes. The Service can be reached at (877) 777-4778.

If your tax return or your tax refund was hijacked by hackers, we’d like to hear your story. Drop us a line and tell what happened to you.


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Jan Legnitto

Jan Legnitto is an investigative journalist and documentary producer who writes about criminal justice and intelligence issues. Jan is also a frequent contributor to the Private I blogs.

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