Tax time has long been a popular time for identity theft, with forms filled with personal information flying through the U.S. postal system. Some of them come from legitimate taxpayers and some of them come from individuals pretending to be legitimate taxpayers and looking to cash in on ill-begotten refunds. To help individuals who have been victims of this type of identity theft, and to help prevent future crimes, the IRS has instated some new rules for tax year 2011.
*Tax returns from past identity theft victims will be red flagged, and extra checks will be put in place automatically to insure that the return is legitimate before it is filed.
*Most tax returns will have to be filed electronically so that the computer system can pass them through electronic filters for manual review if anything appears to be suspicious. Some returns that are flagged will still be processed, but it will take longer for them to clear the system.|
*Some taxpayers at high risk for identity theft will receive a six digit personal identification number from the IRS. These individuals must include this PIN with their tax returns. If they do so, their returns can bypass the filters for extra review so that they can get their refunds in a timely manner. If they fail to do so, the return will be rejected and the person will have to refile by mail. This will continue every year until the IRS no longer flags the account as high risk.
People will be notified if they will receive PINs via a letter in the mail. It is important not to lose this letter if you receive it, and to supply it to your tax preparer if you decide to use one. The number will change every year, so you don’t need to hang onto it for the next tax season, but it’s a good idea to keep it with your records in a secure place.
While these new rules may seem inconvenient, they are a positive step. It is good to see that the IRS is acknowledging the prevalence of identity theft during tax time and trying to do something about it. In previous years, it was tough to prevent if the thief filed a return before the legitimate taxpayer filed. The duplicate return would not be acknowledged until the taxpayer filed, and he or she would be left with the burden of proof.
Take the time to learn how you can protect your identity with our identity theft tips.