Tax Time and Identity Theft

Today is the first day of National Consumer Protection Week. And, as has been the case for 14 consecutive years, identity theft is the top consumer complaint in the United States.

In a statement released Thursday, the Federal Trade Commission reported:

“Identity theft continues to top the Federal Trade Commission’s national ranking of consumer complaints, and American consumers reported losing over $1.6 billion to fraud overall in 2013, according to the FTC’s annual report on consumer complaints released today.

“’Americans of all ages are vulnerable to identity theft, and it remains the most common consumer complaint to the Commission,’ said Jessica Rich, director, Bureau of Consumer Protection. ‘We urge consumers to visit FTC.gov/idtheft for tips to prevent and mitigate the damage from identity theft.’

“The Commission received more than two million complaints overall, as reported in the agency’s Consumer Sentinel Network Data Book 2013, of which 290,056, or 14 percent, were identity theft related. Thirty percent of these incidents were tax- or wage-related, which continues to be the largest category within identity theft complaints.”

As members of the Self-Reliance Institute know, there is no one more skeptical of the federal government and the services it provides than me.

But, as many of you also know, I’ve advised the federal government – along with a number of states, private individuals, and the media – on identity theft and information security issues for many years.

In fact, I first provided testimony and consultation to Congress and the Federal Trade Commission on identity theft and information security issues in 1998 – before the feds even started keeping track of identity theft as a consumer complaint.

So I can tell you with confidence that the information and materials the FTC makes available to the public when it comes to understanding and combating identity theft are worthwhile because I’ve played a role in bringing this issue to the national spotlight.

Bottom line: I highly recommend that you check out the FTC’s identity theft materials at FTC.gov/idtheft and share that web address with your family and friends. And, if you’ve been a victim of identity theft, you can file a complaint with the FTC by going toFTC Complaint Assistant and clicking on Identity Theft in the upper right hand corner.

While National Consumer Protection Week prompted me to share this information with members of the Self-Reliance Institute this week, there’s an even more important reason. In recent years, identity theft and other forms of associated fraud have spiked around tax time and often involve tax-related schemes.

Recently, the Internal Revenue Service released a list of the most frequent tax-related scams in “Uncle Sam’s ‘Dirty Dozen’ List of Tax Scams.”

I want to highlight six of the 12 scams the IRS discusses as they are the six where innocent Americans taxpayers are most likely to be a victim. Those six, with a portion of the IRS description are:

1) Identity Theft – “Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.”

2) Pervasive Telephone Scams – “The IRS has seen a recent increase in local phone scams across the country, with callers pretending to be from the IRS in hopes of stealing money or identities from victims. These phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.”

3) Phishing – “Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft…It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.”

4) False promises of “free money” from inflated refunds – “Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.”

5) Return preparer fraud – “About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft. It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers.”

6) Impersonation of charitable organizations – “Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters. Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.”

To see the entire list and complete descriptions, please go to:“Uncle Sam’s ‘Dirty Dozen’ List of Tax Scams.”

For many folks, tax time is stressful enough. The last thing I want to see happen is for you to become a victim of identity theft at this time of the year when identity criminals are very active. So, please use the resources I’ve provided here today from the FTC and the IRS.

And, if you’ve been a victim of identity theft – especially if it was a tax-related scheme – I’d like to learn of your story. As always, you can email me at [email protected]

Be safe and secure,

Rob Douglas