IRS problems aren't as complicated as they look once you see the structure. I'm attorney Darrin Mish. I've represented taxpayers before the IRS for three decades — in Florida, Colorado, Texas, and internationally. Here's the plain-English breakdown.
Everyone needs to be protected from identity thieves. Last year, the Treasury Inspector General for Tax Administration (TIGTA) estimated that $24.4 billion was attempted to be stolen by identity thieves. A significant proportion of that amount was successfully stolen. In addition, a third of the identity theft cases reported to the Federal Trade Commission last year was tax-and-wage-related ones. Click here to read or watch more IRS Help resources. Click here to watch or read more information on IRS Back Taxes.
One reason why identity theft is so prevalent is the speed of refunds given. The IRS will try their best to pay you your refund within 21 days of your tax return submission. And identity thieves know that the earlier you submit your taxes, the more difficult it is for the IRS to verify your identity. This is because your employer may not have filed in their W-2 yet. Your employer is not required to file your W-2 with the IRS until March, therefore the IRS will only start checking tax returns against W-2’s around the middle of the year. By then, your tax refund would have already been paid to the identity thief.
So here are some steps you can take to protect your Tax Refund from identity thieves.
File early
Beat the identity thieves at their own game. If you can file earlier than the identity thief, you have won. The IRS will reject any submission in your name that comes after yours. But don’t make the mistake of delaying your filing just because you owe Uncle Sam some money. Go ahead and file despite owing some back taxes because you still have until April 15 to pay up even though you have made your filing.
File electronically
If you submit all your documents (including W2’s and 1099’s) electronically, you reduce the chances of your documents falling into the wrong hands and someone discovering your name and Social Security number.
But always remember to do your e-filing at home with your password protected personal computer and not using a publicly shared computer or device.
Apply for a PIN
The IRS has a new initiative where a single-use, personal identification number (PIN) is issued and used on all tax forms for your return to be processed. You do not have to have your identity stolen in order to receive this PIN. But if you have fallen victim to identity theft, you will be given a PIN by default.
To get the six-digit number, you need to register at the IRS website and verify your identity online.
Hire a reputable tax preparer
The first thing to do with a tax preparer is to ask for his PTIN (Preparer Tax Identification Number). This means he is registered with the IRS. But it does not spell competency. So the next step is to check with the Better Business Bureau for this tax preparer’s track record. Then ask your preparer to show you everything about his professional information – telephone number, work address, license, affiliation with a professional organization etc. Tell him you wish to e-file your return. If he does not agree, you should be very wary of him. Read the IRS advice on how to choose a tax preparer.
Check your withholding
You should always make sure your withholding is the same as your tax liability. Most people forget to adjust their withholding after major life events like having a child. Even if no major event has happened it’s good to check your withholding to ensure you do not end up with a huge tax refund. That way, if anything goes wrong you will have less to lose.