Imagine sending in an electronic tax return, only to be told that the taxes have already been filed and the refund paid. That is the first sign most people receive that they've been the victim of tax identity theft. 

In 2013, there were almost 2 million suspected tax identity thefts, compared to about 440,000 in 2010, according to a recent article in the Wall Street Journal. The IRS lost about $5.8 billion to fraudulent claims that year alone.

Tax identity theft is a growing problem, and it is our duty as attorneys and advisors to make sure clients are aware, know the steps to protect themselves, and know what to do should they become a victim.

Get an IP PIN from the IRS

Residents of Florida, Georgia, and Washington D.C. are in a pilot program with the IRS to receive a six-digit Identity Protection PIN that can be used when filing tax returns, since those areas have the highest rate of tax identity theft. Clients can apply for a PIN at

The IRS has also been monitoring for fraudulent activity and sent letters offering PINS to approximately 1.7 million additional people whose accounts had suspicious activity that sent up red flags to agents.

Victims of tax identity theft can apply for a PIN for filing returns once their case has been resolved. From that point, returns cannot be filed without the PIN and a new number is sent every year to help protect victims from recurring incidences.

Practice cyber-safety

Remind clients that the IRS never initiates contact by email, text messages or social media. If they receive such messages, even if they look legitimate, clients should not open any links. Those links could have malware which can steal your information, a cybercrime called phishing.

They should also use strong passwords and change them frequently, update their antivirus and computer application software, and password protect their Wi-Fi access in order to prevent hackers from accessing their personal data. Clients should also be aware when using public Wi-Fi services in airports, restaurants, etc. that their laptops or mobile devices are at a higher risk of being hacked.

File Form 14039, "Identity Theft Affidavit"

Many things can leave clients open as potential targets for tax identity theft.
•    Phishing scams on the internet. 
•    Data breaches, like the massive one at health insurer Anthem, which may have exposed personal information of nearly 80 million people.
•    A stolen purse or wallet.
•    Stolen mail.

To protect clients, we recommend they file a Form 14039 "Identity Theft Affidavit" and check Box 2. The risk to their private information is too important to ignore. Filling out the form is easy and could prevent hours of time spent trying to repair the damage after the fact.

If the Worst Happens

The IRS has a set of procedures victims must follow before calling the agency. We recommend clients act immediately to report the problem.

According to the IRS, victims must file a police report, an affidavit with the IRS, and a complaint with the Federal Trade Commission. In addition, they must contact one of the three major credit-reporting companies to place a 90-day fraud alert on their credit records; and closing any fraudulent accounts opened in their names. In addition, it can be a good idea to impose a credit freeze with credit-reporting firms, which can prevent extensions of credit using their identity. 

Finally, the IRS recommends victims should also file their tax returns on paper.

There is a little good news. Tax identity theft can be one of the least damaging kinds of identity theft. Though it may take up to 18 months complete the process, the IRS will ensure that taxpayers' problems are resolved. Remind clients that, though it is time-consuming, the process does not require costly legal fees to prove their identity.

To learn more about common estate planning issues, check out our free guide, Estate Planning Pitfalls: The 12 Most Common Threats to Your Estate & Your Family's Future, or to discuss your estate planning concerns, please call our office at 919-443-3035 or use our contact form.

Jackie Bedard
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Attorney, Author, and Founder of Carolina Family Estate Planning