Income tax identity theft by which identity thieves steal the names and Social Security numbers of people and then file phony income tax returns complete with forged W-2s and 1099s in order to claim huge phony refunds is a big problem that is expected to get worse.  Recently, however, a number of states including Louisiana, South Carolina and Connecticut as well as the IRS have started using advanced computer programs to help identify fraudulent tax returns before they send a refund.  These software programs developed by companies such as IBM and LexisNexis use publicly available information to cross reference the information in the phony returns to see if they match available data, such as where a person filing a tax return is living in a new state from where the real person had filed a return previously.  A simpler method, which the IRS still is not using is to cross reference the counterfeit, phony W-2s and 1099s with the real W-2s and 1099s filed by employers and company’s issuing 1099s at the time of the receipt of the income tax return rather than months later as is their present protocol.


Along with keeping your Social Security number as private and safe as you can to prevent it from being stolen, the best thing you can do to avoid income tax identity theft is to file your income tax return as early as possible so that an identity thief does not have the opportunity to file a phony one before you do.