Since income tax first became a major problem for the IRS in 2008, the IRS has lost billions of dollars every year and the problem is getting worse. The crime is somewhat simple and exploits a number of flaws in the IRS processing of income tax returns, most notably that the IRS does not match 1099s and W-2s for many tax returns until months after the return is filed and the refund has been made. Identity thieves exploit this flaw by filing early and electronically with counterfeit 1099s and W-2s to steal billions from the federal government every year. The key to income tax identity theft is the gathering of the names and Social Security numbers of victims and using them to file the bogus income tax returns. Recently, as part of an increased effort to catch income tax identity thieves, Miami police officer Malinsky Bazile was convicted of stealing personal information of a thousand people from the Miami police department’s data base and using that information to file phony income tax returns.
Until the IRS gets its act together, the best place to find a helping hand is at the end of your own arm. The two main things you can do to reduce your chances of becoming a victim of identity theft are to safeguard the privacy and security of your Social Security number as much as possible and file your income tax return early. Income tax identity thieves are only able to get a refund using your name and Social Security number if they file before you do. The early bird gets the tax refund. It is also important to file early because if you do become a victim of identity theft, the IRS is extremely slow in investigating the crime and it will be many months before you get your legitimate refund.