the advisor

Issue 1, 2014  |  Table of Contents

Preventing Identity Fraud
By Aaron Brezko, CPA/CFF, CFE

In February 2014, the Internal Revenue Service (IRS) ranked identity theft as #1 on its list of “Dirty Dozen” tax scams. From 2008 through May 2012, more than 550,000 taxpayers have been victims of Stolen Identity Refund Fraud (SIRF). The recently concluded tax season was no exception as the IRS saw a significant increase in the number of SIRF cases particularly among healthcare professionals.

SIRF is a type of identity theft that involves a person or organization obtaining an individual’s name and social security number, then filing a fraudulent return using the victim’s personal information. The hopes of the identity thief are that the IRS accepts the fraudulently filed return and deposits the refund in a bank account that the thief has opened in the taxpayer’s name.

The fraud is typically discovered by the victim taxpayer in one of two ways:

  • When the fraudulent return is filed, the IRS identifies income or deduction items that do not match with what the IRS has on record. The IRS then issues a letter to the taxpayer stating that a tax return has been filed in the taxpayer’s name and to please contact the IRS as they need additional information, or;
  • When the taxpayer attempts to file his tax return and the return is rejected because a return has already been filed with their information.
What should one do if they become a victim of SIRF? Below are initial steps that should be taken, although this is not a comprehensive list:
  • Contact the IRS. The IRS will flag the taxpayer’s account as an identity theft and stop processing the fraudulently filed tax return. Additionally, an IRS Form 10439, Identity Theft Affidavit, needs to be completed and filed with the tax return.
  • Contact the Federal Trade Commission’s Identity Theft Clearing House.
  • Contact one of the three major credit agencies: Equifax, Experian or TransUnion. Once one has been contacted, they must notify the other two agencies.
  • Contact the Social Security Administration.
  • Contact a local law enforcement office.
The IRS has more than 3,000 employees working directly on cases regarding identity fraud and has trained another 35,000 to work with taxpayers who have fallen victim to identity fraud. The sheer number of resources that the IRS is allocating shows it is likely impossible to completely eradicate SIRF. While this is the case, here are a few basic tips the IRS offers for protection:
  • Do not carry a social security card in a purse or wallet;
  • Do not give a social security number to a business just because they ask for it— ask why they need it;
  • Do not give personal information over the phone, mail or Internet without having been the one to initiate the contact;
  • Secure personal information at home; and
  • Check credit reports at least every 12 months.

About the Author
Aaron Brezko is a director in Katz, Sapper & Miller’s Healthcare Resources Group. Aaron provides strategic business planning, as well as other general business and accounting services, to a wide variety of healthcare clients and closely held businesses. Connect with him on LinkedIn.