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Media > Newsletters > Consumer Advocate > March 2016 > A Taxing Problem: Tax Identity Theft

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A Taxing Problem: Tax Identity Theft

When most people think of identity theft, they likely think of opening fraudulent accounts, making unauthorized credit card charges, or taking money out of a bank account without permission. They may not think of a large nationwide problem – tax identity theft. However, according to the Federal Trade Commission, tax-related identity theft is the most common type of identity theft reported throughout the nation. 

Tax identity theft occurs when scammers file fraudulent tax returns using someone else’s Social Security number in order to keep the refund, meaning the true filer cannot access the refund. The Government Accountability Office estimates that in 2013, the Internal Revenue Service (IRS) paid out $5.2 billion in fraudulent identity theft refunds. Last year, nearly 45 percent of the complaints filed with the Ohio Attorney General’s Identity Theft Unit related to tax identity theft. 

To combat this issue, last year, the Ohio Department of Taxation began issuing “Identity Confirmation Quizzes.” These quizzes were designed to help confirm the identity of the person filing taxes by asking questions that only the filer would know. This tax season, the Department of Taxation plans to utilize the quizzes again to cut down on the number of fraudulent returns. Letters will be mailed to taxpayers who are subject to the quiz, but filers can take the quiz online. If you receive a letter asking you to take the quiz and you have not yet filed your taxes, contact the Department of Taxation immediately to report the return as suspicious. 

The best way to combat tax identity theft is to file your taxes early. The sooner you file, the less likely it is that someone can file on your behalf. Also, if you choose to use a tax preparer, make sure that the tax preparer has the credentials that you’re looking for by visiting the IRS’s Directory of Federal Tax Return Preparers or by confirming a Certified Public Accountant’s credentials.

In addition to stealing identities, con artists are also trying to bilk consumers out of money by posing as IRS agents or representatives of the U.S. Treasury. The scam generally occurs when a fraudster contacts a consumer, claiming to be an IRS agent, stating that the consumer owes the IRS money and will be sued or immediately arrested unless the consumer provides payment. In reality, any money sent will go to the scammer, not the IRS. The con artist might also ask for personal information, such as a Social Security number, which can then be used to commit identity theft. To protect yourself, never provide payment directly over the phone to someone who claims to be from the IRS.

If you believe you’ve been the victim of tax identity theft, you should submit the appropriate tax affidavit for your state or federal taxes. If you have any other issue related to identity theft or scams, report it to the Ohio Attorney General’s Office by calling 800-282-0515 or visiting