Protect Yourself from Tax Return Identity Theft
Last updated January 31, 2025
Some forms of identity theft are relatively easy to deal with, such as stolen credit card numbers. But it’s a nightmare to unravel tax refund theft if an imposter grabs your Social Security number and files a return in your name.
Hundreds of thousands of Americans become victims of tax-related identity theft each year, “typically through no fault of their own,” according to the Taxpayer Advocate Service (TAS) at the IRS. TAS called it one of the “most serious problems” faced by taxpayers in 2023 and 2024. In fact, the IRS saw more than a three-fold increase in tax identity theft following the pandemic, as fraudsters targeted pandemic-related benefits.
“Identity theft, in general, is very lucrative, and tax identity theft can be extremely lucrative,” said Eva Velasquez CEO of the nonprofit Identity Theft Resource Center (ITRC).
Committing the crime has become easier in recent years because so much personal information has been exposed through massive data breaches.
“All of your credentials are already out there; your data has been breached,” Velasquez told Checkbook. “Everything that’s needed to file a fraudulent tax return in your name is available for purchase. So, we have to employ additional protections.”
Here’s how to fight back.
Combating Tax Refund Fraud
A simple, but effective way to prevent tax identity theft is to request an identity protection PIN (IP PIN) from the IRS. This unique six-digit number prevents anyone else from using your Social Security Number (SNN) or individual taxpayer identification number (ITIN) to file a return in your name. It’s like freezing your credit files to lock out the bad guys.
“Even if a thief has all the information about you, anything that would be necessary to file those taxes in your name, without that PIN, they cannot succeed,” Velazquez explained. “We encourage everyone to use an IP PIN.”
In the past, the IRS issued IP PINs only to fraud victims but it’s now available to all taxpayers for free. I just got mine. It took less than a minute. You will need to have or create an online IRS account to request an IP PIN.
IP PINs are good for one calendar year. You’ll need to request a new number each year.
Look for Warning Signs
“Monitor your mail,” said Amy Nofziger, director of victim support at the AARP Fraud Watch Network. “If something comes from the IRS, pay attention to it. That is your first signal that you might be a victim. And certainly, always reach out to the IRS or somebody for help.”
Most victims don’t realize they’ve been targeted until they send in their tax return and receive a warning letter from the IRS that more than one return was filed with their Social Security number, or that they didn’t declare all their income from a company they didn’t work for. Other IRS notifications that could indicate a problem: an online account was created in your name that you didn’t open, or you were assigned an employee identification number that you didn’t request.
If you suspect your tax refund was stolen, first file a claim with the IRS via its website. That’s just the start of a process one fraud expert told Checkbook is “tedious, cumbersome, and takes forever.”
Experts at AARP’s Fraud Watch Network Hotline (877-908-3360) can give you some guidance on how to do this. You do not need to be an AARP member. You can also get help from the Identity Theft Resource Center by calling 888-400-5530.
Victims Face Long Delays
What do you do without your refund money, as you try to get the IRS to process your legitimate return? More than a third (37 percent) of U.S. taxpayers depend on their refunds to make ends meet, according to a new survey by Intuit Credit Karma.
Carmen Aguiar, a certified public accountant in the Seattle area, told Checkbook it’s “very stressful, and time-consuming” for tax ID theft victims to navigate the IRS. “They may be told that they owe tax money, when, in fact, they actually have refunds,” she said. “That obviously creates a hardship.”
Delayed processing can trigger other tax issues, such as erroneous “balance due” notices for subsequent years, potentially resulting in interest charges, penalty fees, and letters of intent to “levy” funds from your bank accounts.
According to the TAS report, the average processing time to resolve Identity Theft Victim Assistance claims and send the legitimately owed refunds was more than 22 months. While the IRS has been taking steps to reduce that processing time, National Taxpayer Advocate Erin Collins called the delays “unconscionable.”
More from Checkbook:
Identity Theft and Fraud: How to Protect Yourself
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Twitter, and at ConsumerMan.com.