Victim of Tax Fraud? What do you do next?

Look, I get it. The guy was offering Celine Dion tickets in exchange for your Social Security number, so how could you refuse? I did something similar in college in exchange for a pita (which, thankfully, turned out to be a real promotion by Discover Card). If it’s not legit, though, don’t be surprised to find that someone has already filed your tax return for you a few months later, claiming a huge refund and depositing it straight into their account.

Now honestly, despite the IRS provided list of tax fraud schemes blaming the victim, oftentimes there’s nothing we can do to avoid tax fraud. For example, your company’s health insurance provider could be subject to a major data breach (purely hypothetical, of course). However you got there, someone stole your identity, and you’re in a tough spot come tax return time.

What do you do next?

Preventing Tax Fraud

Security according to stock photography. Definitely no way to get around that chain.

The first step in dealing with tax fraud is to file IRS Form 14039 (PDF link to latest version as of writing). The two page long form is a signal to the IRS that something’s wrong.

Next, just because someone filed a tax return in your name doesn’t excuse you from filing your actual return. Most people discover tax fraud when the IRS’s e-file system bounces back their return like a rubber ball in a schoolyard game of Four Square. If that’s the case, print out your return and mail it in. I know we all prefer to be on the forefront of tax filing technologies, but suck it up and go retro for the year (trucker hat and parachute pants not required for paper filing).

Here comes the bad news: don’t expect the issue to be resolved any time soon. Tax Fraud cases will take months, perhaps even years, to get all sorted out.  If you owed taxes that year, it’s not that big a deal, since you’ll be out the same amount either way. If you’re expecting a refund, though, put those plans for a new TV on hold until the cash is actually in hand, ’cause you’re in this for the long haul.

While you’re waiting for the IRS to figure out the situation, do all the other identity theft steps you’d expect: report it to the police, tell your financial institutions, put an alert on your account with a credit bureau, file a complain to the FTC. All those fun things that take hours and hours to resolve just because a jerk wanted some ill-gotten gains.

The good news is that you shouldn’t be expected to cough up the amounts extracted in your name. It’ll just take a long time to get all the tax fraud worked out.

Good luck.