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Tips on Recognizing Identity Theft

Concern about identity theft is widespread, and many of us take steps to protect ourselves. Even with our efforts, however, identity theft continues to be a big problem: over 10 million Americans have their identity stolen each year.


Typically, when we think about identity theft, we think about the security of our credit card and bank accounts. But in 2015 nearly 50 percent of identity theft complaints received by the Federal Trade Commission were tax-related, making it the FTC’s top complaint for six years running. What if it happens to you?


Here are two ways you can determine if you potentially have an identity-theft situation:

  • Review copies of tax account transcripts from the IRS
  • Order and review credit reports from the three major credit reporting agencies: Equifax, Experian, and TransUnion


IRS Transcripts

The most relevant IRS transcript for your purposes – the tax account transcript – includes basic tax return information and any recent activity to your account. It will be up to you (possibly with the help of an advisor) to analyze and interpret the reports in terms of potential identity theft.


IRS transcripts are available online at the “Get Transcript” page of the IRS website; by calling 800.908.9946 to receive a transcript by mail; or by submitting Form 4506-T.


Tax account transcripts provide information such as return type, filing date, marital status, adjusted gross income, taxable income, credits and payments, and any adjustments the IRS made after you filed your return. 


Tax account transcripts are particularly useful in helping identify problems. Three-digit transaction codes (TCs) accompany each tax account. Once you file your tax return, your account is marked TC 150, which means the return was processed and posted to your account.


If a duplicate return is filed, TC 976 is attached to your account to indicate more than one return has been posted. Duplicate filings are a strong indication that identity theft may have occurred, and you should contact the IRS to conduct a further investigation into the issue. Your account will be marked TC 971 AC 522 when identity theft is suspected either by IRS or by your report to the agency. 


Action – Identity Theft Affidavit Form 14039: If you receive any information that your personal information has been lost, stolen, or compromised or if you receive notification from the IRS that reflects activity on your account not initiated by you, you should notify the IRS immediately either by phone or by submitting Identity Theft Affidavit Form 14039.


The agency may also mail a letter letting you know that it has halted processing your returns and ask that you fill out and file Form 14039. You should also submit this form if you receive a letter from the IRS describing the following circumstances:

  • Your return was rejected because one was already filed under your Social Security number.
  • There are questions related to unreported income that is not related to you.
  • There are questionable activities such as a balance due, a refund offset, or collections on a closed tax year or on a year that had no filing requirement.


Credit Reports


Many experts also recommend taking advantage of free annual credit reports from each of the three major credit reporting agencies: Equifax, Experian, and TransUnion. While you can request all three reports at once, many experts advise staggering the reports throughout the year in order to monitor them more closely. These reports can be obtained through a central website.


According to a Thomson Reuters Checkpoint document on identity theft, you should watch for the following indicators in your credit reports:

  • Do any inactive accounts show new activity?
  • Is there a line of credit that you did not open or that looks unfamiliar?
  • Is an account unfamiliar, does a familiar account reflect activity of which you are unaware, such as being overdue, delinquent, or in collections?
  • Are there inquiries from creditors that you don’t recognize?


Actions – In any of these cases or other suspicious activity, the FTC recommends taking the following steps: 


First steps:

  • Call the company where you know fraud has occurred
  • Place a fraud alert
  • Report identity theft to the FTC
  • Optionally file a report with your local police department


What to do next:

Take a deep breath and begin to repair the damage.

  • Close new accounts opened in your name
  • Remove bogus charges from your accounts
  • Correct your credit report
  • Consider adding an extended fraud alert or credit freeze


Other possible steps:

  • Report a misused Social Security number
  • Stop debt collectors from trying to collect debts you don’t owe
  • Replace government-issued IDs
  • Clear your name of criminal charges


In Conclusion

Because of the breadth of identify theft and the cost both to individuals and institutions, most governmental departments, banks, credit card companies, and other companies and organizations are working hard to combat it across the board. To support these efforts, you should definitely consider doing your part, particularly as concerns the possibility of tax-related thefts. By requesting your free IRS transcripts and credit reports, you can facilitate early detection and set additional defenses in motion.