IRS flagged more than 1 million tax returns for identity fraud in 2023

The IRS flagged much than 1 cardinal taxation returns for imaginable identity theft during the 2023 taxation season, according to the U.S. Department of the Treasury, signaling that specified fraud continues to beryllium a pervasive problem for taxpayers.

Tax-related individuality theft occurs erstwhile criminals usage a taxpayer's idiosyncratic accusation to record a instrumentality successful their sanction to assertion their national taxation refund.

The IRS identified astir 1.1 cardinal taxation returns arsenic perchance fraudulent arsenic of March 2, according to a Treasury report issued to the nationalist Tuesday that analyzed information partway done the filing season. The associated refunds were worthy astir $6.3 billion.

The IRS had confirmed 12,617 of the taxation returns were fraudulent arsenic of the aforesaid day successful March, Treasury reported. That fig is up from 9,626 taxation returns astatine the aforesaid clip successful 2022.

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Tax-related individuality theft has been a occupation since astir 2004-05, and it "only got worse" since then, said Nina Olson, enforcement manager and laminitis of the Center for Taxpayer Rights.

"It went from being a one-off [thief] ripping disconnected someone's Social Security fig to a full strategy and organized crime," Olson said.

Identity theft was the astir prevalent benignant of fraud that consumers reported to the Federal Trade Commission successful 2022. A abstracted study issued past twelvemonth by the Identity Theft Resource Center suggested that individuality transgression jumped to an all-time high successful 2021.

The IRS accrued the fig of filters it uses to place perchance fraudulent taxation returns since the 2022 taxation season. The bureau utilized 236 filters during the caller taxation season, compared with 168 filters past year, Treasury said.

Tax returns identified arsenic fraudulent by these IRS filters are held during processing until the IRS tin verify the taxpayer's identity.

"They're trying to ace down ... to marque definite you're [the one] really filing," said Dan Herron, a certified nationalist accountant and certified fiscal planner based successful San Luis Obispo, California.

Sometimes, the strategy inadvertently catches returns that aren't fraudulent, though.

One of Herron's caller clients had been filing a insubstantial taxation instrumentality each twelvemonth with a antithetic accountant but filed an physics instrumentality successful 2023. The lawsuit received an IRS announcement successful the message saying that the instrumentality had been flagged for fraud. The lawsuit had to interaction the bureau to verify their individuality — delaying the issuance of a taxation refund by respective weeks, Herron said.

"It's not a cleanable system, but it's going successful the close direction," Herron, laminitis of Elemental Wealth Advisors, said of the IRS systems.

Taxpayers whitethorn not cognize they're the unfortunate of tax-related individuality theft until they effort to record a instrumentality online and larn that a instrumentality was already filed utilizing their Social Security number. The IRS whitethorn besides nonstop a missive saying it identified a suspicious instrumentality utilizing your SSN, for example, among other telltale signs.

Taxpayers tin inactive assertion a refund if this happens. But they'll person to instrumentality further steps to beryllium their individuality to the IRS, and their refund volition apt beryllium delayed arsenic a result.

Perhaps the champion mode for taxpayers to forestall individuality theft is to petition an Identity Protection Personal Identification Number (IP PIN) straight from the IRS, Olson said.  

The IP PIN is simply a six-digit fig assigned to eligible taxpayers astatine the commencement of each filing season. It's known lone to the payer and, erstwhile issued, is needed erstwhile filing a taxation instrumentality arsenic an authentication measure.

A taxation instrumentality filed by a scammer without the associated IP PIN would not beryllium processed, Olson said. She recommends taxpayers who privation an IP PIN petition 1 successful the second portion of the calendar year, up of the taxation season, and that they support it handy.

The IRS issued 802,449 full IP PINs to taxpayers arsenic of March 4, according to the Treasury's report.

Taxpayers tin besides trim their hazard by trying to record a instrumentality aboriginal successful the taxation season, experts said. The IRS besides recommends several online information measures tied to computers and mobile phones, integer passwords, multifactor authentication and avoiding suspicious email links oregon attachments.

The IRS besides ne'er initiates interaction with taxpayers by e-mail, substance oregon societal media to petition idiosyncratic oregon fiscal information, and ne'er calls to endanger lawsuits oregon arrest, the bureau said.

The IRS recommends victims of tax-related individuality theft instrumentality a fewer important steps: