Tax identity theft surprises people because it happens quietly. Criminals often work early in the filing season, long before you feel ready to prepare your return. They only need a few pieces of personal information to move forward, and many victims never realize their details were stolen.
As a firm that helps consumers address financial harm created through identity theft, background check errors, and credit report inaccuracies, we understand how disruptive these issues can be. Our role at Sherman & Ticchio PLLC becomes more important once stolen information spills over into credit files or background screenings.
Before going into the steps you can take, it helps to understand how this type of theft happens and why it continues to affect so many Americans.
Tax Identity Theft: How Can It Occur?
Tax identity theft happens when someone uses your personal details to file a phony return or gain access to IRS systems in your name. The thief’s primary goal is often simple: claim a refund or tax credit before you have a chance to file.
This type of fraud affects hundreds of thousands of people. The IRS flagged nearly 1.1 million returns as of March 2, 2023 for possible identity theft, and refunds linked to those returns totaled more than $6 billion.
The fallout can last far beyond tax season. Once someone holds enough of your information to file a fraudulent return, they can use those exact details to open accounts, apply for loans, or secure employment under your name. Those actions may appear later in credit reports or background checks, creating a separate set of problems.
Consumers often come to us with concerns about these secondary effects. False account entries or criminal records tied to identity theft can interfere with job applications and financial opportunities. Our work with consumers includes support with background check litigation and credit report litigation when identity theft leads to inaccurate reporting that violates federal law.
How Does Tax Identity Theft Occur?
Identity thieves rely on a wide range of methods, from simple tactics to more organized attacks. Understanding how these approaches work helps you see how your information might have been exposed.
- Stolen Documents and Mail
Many incidents start with something as basic as stolen mail. Tax forms like W-2s, 1099s, and financial statements can contain everything a thief needs. If a document includes your Social Security number, address, and employer information, a criminal already has a strong foundation for a fraudulent return.
Some thieves steal mail directly from homes or from unsecured mailboxes. Others gain access to files through break-ins, shared living spaces, or misplaced paperwork. Shredding documents before disposal and keeping tax records in a secure location helps reduce risk.
- Large-Scale Data Breaches
Data breaches continue to place millions of consumers at risk. When a breach exposes Social Security numbers, birthdates, and addresses, that information circulates in ways that make tax fraud easier to commit.
Many victims do not realize their information has been compromised because they were never involved in the breach directly. Cybercriminals combine stolen data with public information to build detailed profiles that make fraudulent filings appear legitimate.
- Phishing Attempts and Social Engineering
Phishing schemes play a major role in identity theft. Criminals craft messages that appear to be legitimate communications from payroll services, banks, health plans, tax preparers, or even the IRS. These messages may warn of account problems or delayed refunds, pushing recipients to click a link or provide details.
Some phishing scams contain spelling errors or off-tone greetings, but others appear polished enough to fool many consumers. These scams have changed, now including text messages, fake QR codes, and mimic websites meant to collect personal information.
- Creation of Fraudulent IRS Accounts
Some identity thieves attempt to create an online IRS account in someone else’s name. With that account, they can view tax transcripts, change information, and gain an advantage when filing a fraudulent return.
If you receive a notice that an account was created without your request or that your account was accessed or disabled, treat it as a warning sign of possible identity theft.
- Early Filing of Fraudulent Returns
Criminals often take advantage of the early part of the tax season. Filing early lets them slip their fraudulent return into the system before you have a chance to file your own.
When you later attempt to e-file, the IRS rejects your submission because it already shows a return under your Social Security number. This scenario has become one of the most common early indicators that a fraudulent filing took place.
Warning Signs that Something Might Be Wrong
Tax identity theft can feel invisible until a sudden problem appears. IRS notices tend to create worry immediately, yet these letters often provide the first clues that someone misused your information. You may see signs such as:
- A rejected e-filed tax return because one already exists
- IRS letters about suspicious account access
- A tax transcript mailed to your home that you never requested
- A notice describing income from an employer you do not know
- A notification that a return was filed for a year when you did not file anything
- An Employer Identification Number assigned to you without your request
Some consumers also notice unusual credit activity around the same time. If a thief used your information to apply for loans or open accounts, those actions may appear in your credit reports or background checks. These inaccuracies can place pressure on job applicants and individuals applying for housing or credit.
What to Do When You Suspect Tax Identity Theft
Responding quickly helps you regain control of your information. While our firm does not communicate with the IRS on your behalf, we can guide you through understanding the broader credit reporting effects that often follow identity theft.
- Contact Credit Bureaus
Tax identity theft often leads to issues outside the IRS. You can request a fraud alert through Experian, Equifax, or TransUnion. This alert adds a layer of protection if anyone attempts to open new accounts in your name.
- Review Your Credit Reports
Checking your credit reports helps you spot suspicious activity. You can access them at AnnualCreditReport.com. Missing accounts, unknown inquiries, or new loans you never applied for can signal ongoing identity theft. Our firm can review your reports as well and help you dispute inaccurate entries when your rights under the Fair Credit Reporting Act have been violated.
- Address Unauthorized Accounts
If you find a fraudulent account, you can contact the lender to request closure. Filing a report through IdentityTheft.gov also helps you document what happened and access recovery tools.
How to Reduce the Risk of Tax Identity Theft
You can limit your exposure through several practical habits. None of these eliminates risk completely, yet they help you protect your information and spot suspicious activity faster.
- File Early in the Season
Submitting your return early narrows the window available for criminals to file using your information.
- Strengthen Your Digital Security
Using two-factor authentication and avoiding public Wi-Fi networks for tax filings adds helpful protection. Many tax preparation platforms support additional verification layers that add extra security.
- Stay Alert to Phishing Attempts
Be cautious with messages that request personal details, claim a sudden problem, or encourage you to click a link quickly.
- Shred Sensitive Documents
Old tax forms, calculation sheets, and outdated statements should be shredded before disposal to prevent unauthorized access.
- Safeguard Your Social Security Number
Avoid giving out your Social Security number unless absolutely necessary, and store your physical card in a secure place rather than carrying it.
How We Support Consumers Facing Identity Theft
Tax identity theft can feel overwhelming because it rarely stops at the IRS. Once your information circulates, mistakes may enter your credit reports or background checks. These errors can create real problems for job applicants, renters, and anyone applying for credit.
Our firm is prepared to represent consumers under the federal Fair Credit Reporting Act when inaccurate reporting tied to identity theft harms their financial opportunities.
We can review your credit reports, spot inaccurate entries, and help you dispute harmful information. If a background check reflects identity theft or incorrect criminal history, we can also guide you through litigation options available through the FCRA.
After Tax Identity Theft
Discovering that someone misused your information can feel unsettling, and the road to recovery often stretches longer than anyone expects. While the IRS works through your case, we can help you address the credit and background reporting issues that arise along the way.
You deserve accurate information tied to your name. Our team at Sherman & Ticchio PLLC is prepared to support you as you work toward resolving inaccuracies that affect your financial stability. Contact us and learn how we can help you regain control of your information.