What is Stolen Identity Refund Fraud (SIRF)?
Stolen Identity Refund Fraud (SIRF), also known as identity theft tax refund fraud is a type of identity fraud. In this scam, an identity thief uses your identity to file taxes and claim fraudulent refunds.
According to the Internal Revenue Service of the United States, Stolen Identity Refund Fraud is the No. 1 fraud in the IRS. During the 2013 tax filing season, more than 5 million tax returns were filed using stolen identities which claimed over $30 billion in refunds.
According to J. Russell George, U.S. treasury inspector general for tax administration, Stolen Identity Refund Fraud is a growing epidemic. George said that the number of identities stolen in tax refund crimes in the first six months of 2013 was greater than the total number of identities stolen in the whole year of 2012.
How does the scam work?
A Stolen Identity Refund Fraud occurs when a criminal steals and uses your personal identifying information such as your name, Social Security Number (SSN), etc. to file for taxes. The criminal files for taxes on your behalf and acquires the fraudulent tax refunds.
Are you one of those Americans who wait until the last day to file their taxes? If yes, then you can be the next victim of this horrifying crime. Never wait till the last moment to file the taxes as identity thieves are behind you. After stealing your personal information, identity thieves plan to file taxes in your name before you actually file them. By filing the taxes earlier than you, the thieves will surely obtain the fraudulent refunds before you can.
Due to paperless e-filing, it has become easier for the criminals to commit this crime. Thieves make up fake income information, submit the relevant information electronically, and then receive the fraudulent tax refunds either through mail or they are directly deposited into their accounts.
How criminals acquire your information?
Criminals can acquire your personal information through various methods. They are given below:
- They may hack the systems of various companies and agencies to obtain sensitive information.
- They can call you by impersonating IRS agents to acquire your SSN.
- They may pretend to be tax agents or bank officials and email you to acquire your data.
See how the thieves acquired the identities of several individuals in this real life Identity Theft Tax Return Fraud Case.
What is the impact of the scam on the victims?
This crime can have devastating effects on the victims:
- If an identity thief acquires your personal information and uses it to file taxes, then firstly, you won’t receive your tax refunds as the thief has acquired them.
- Secondly, the identity thief can also use your personal information to obtain credit/debit cards, acquire loans or mortgages, and get jobs.
- What’s more? The identity thief can even destroy your credit rating. To clear your records, you will have to spend several hours and lots of money.
- Some taxpayers become the victim of Stolen Identity Refund Fraud twice in a row!
What are the warning signs of stolen identity refund fraud?
You can discover that you are a victim of this crime from the following two facts:
- When you file your taxes, you find that it has already been filed by someone else.
- The IRS sends you a letter informing you about a suspicious return using your SSN.
What is the government doing about this?
The IRS is working efficiently to combat the threat using its skilled team of investigators. After finding various flaws in its online e-filing system, IRS is working towards implementing the necessary changes. The FBI has teamed up with the IRS and said that IRS is working towards making enhancements in fraud prevention.
How can you reduce the risk of SIRF?
You can prevent yourself from becoming the victim of this crime by taking the following steps:
- Protect your documents having personal information.
- Don’t carry your Social Security Card everywhere.
- Ensure your tax records are secure.
- Secure your financial data.
- Obtain a credit report from any of the credit monitoring services.
- File your taxes early.
- Keep your computers secure by installing a reliable anti-virus software, firewall, and regularly updating software.
- Regularly change your passwords and never open suspicious emails.
What steps must be taken if you become the victim of SIRF?
Several relevant steps must be taken if you become the victim of SIRF. These are:
- File an Identity Theft Affidavit with the FTC by contacting it identitytheft.gov
- Put a fraud alert on the credit reports by contacting the three major credit reporting agencies–
- Equifax (www.Equifax.com, 1-800-766-0008),
- Experian (www.Experian.com, 1-888-397-3742), and
- TransUnion (www.TransUnion.com, 1-800-680-7289)
- Contact the institutions which are directly affected by the fraud.
- Close any credit accounts opened without your permission or any existing accounts accessed by identity thieves.
- File a police report with local police.
By having sufficient knowledge about Stolen Identity Refund Fraud, and taking appropriate measures at the right time, the extent of losses by this crime can be decreased.