What is Tax-Related Identity Theft?

What is Tax-Related Identity Theft?

Tax-related identity theft or tax fraud occurs when an identity thief steals a taxpayer’s identity to file for a fraudulent return and claim their tax refund. The identity thief uses a stolen Social Security number (SSN) and consumer information to file a forged income tax return early within the filing season, before the victim files. The scammer then receives the victim’s refund before the IRS processes the original filing. With paperless e-filing, the scam has become simpler than ever before. Identity thieves, who scheme and invent phony wages or other income, submit the knowledge electronically, and then receive the fraudulent refund via mail or direct deposit. The thief will have already cashed the refund check, or withdrawn it from the bank, by the time the theft is realized.

What is the Meaning of Tax Return Identity Theft?

Tax return fraud is the act of filing a return, employing a stolen identity, and taking the victim’s refund. It is the 3rd largest theft of all federal funds, after Federal Unemployment Benefits and Medicare. This kind of fraud is equipped with three simple ingredients: a reputation, birth date, and Social Security number (SSN), all of which allow the thief to commit tax fraud, leading to delayed or stolen refunds. While a swiped refund could seem like a worst-case scenario, thieves can also use an individual’s stolen identity to gain employment, causing even greater distress. When an identity thief uses a person’s SSN for employment, all the income they earn under their victim’s identity is reported. This means that once the victim files their taxes, showing that the earned income numbers don’t match, the IRS will flag the victim’s returns as suspicious. This will have significant financial impacts if taxes on the unclaimed earnings are imposed, and may well cause prolonged stress, with an invitation to audit the victim’s taxes.

How to Identify Theft Tax Return?

Most people don’t know they’re victims of tax identity theft/tax fraud until they file their tax returns and the IRS rejects them. Signs consumers have become a victim of a fraudulent tax filing include:

  1. Cases where more than one income tax return was filed and their return was rejected.
  2. When consumers have a due balance, their refund is offset, or they have had collection actions taken against them.
  3. When IRS records indicate that they received more wages than they really earned.
  4. If someone uses the victim’s SSN to urge employment, the employer may report that person’s income to the IRS using the victim’s SSN. IRS records will show that the victim did not report all of their income. The agency will send the victim a notice or letter saying, ‘You have received wages you didn’t report’.
  5. In cases where state or federal benefits were reduced or canceled, because the agency which was involved received information regarding an income change.
  6. An unexpected letter arrives from the IRS or Missouri Department of Revenue, which inquires about a tax return that the victim didn’t file.

How To Reduce the Risk of Identity Theft

Joint efforts by the IRS, states, and the tax industry are used to guard a person’s data. We all have a task to play when it comes to reducing tax identity theft. Here’s how a possible victim can get help:

  1. The individual should always use security software that has a firewall and antivirus protection, accompanied by strong passwords.
  2. They should learn to acknowledge and avoid phishing emails, threatening calls, and texts from thieves posing as legitimate organizations, such as their bank, MasterCard companies, and even the IRS.
  3. They should never attempt to click on links or download attachments from an unknown party or from a suspicious email.
  4. They need to protect their personal data at all costs. They should ensure that they don’t carry their Social Security card routinely, and confirm their tax records are secure.

How To Report Identity Theft

If a person discovers they, or someone they know, is a victim of tax identity theft, or tax-related fraud, they can take the following steps:

  1. Contact the IRS immediately. If a person receives a notice, they should respond immediately. They can also contact the IRS at their helpline number to secure their tax account and Social Security number (SSN).
  2. Complete and submit an IRS fraud Affidavit. IRS Form 14039, Fraud Affidavit, is a fillable form on the IRS website. It is filled out when an individual tries to e-file their taxes and gets rejected due to a replica filing. The victim must fill out and print the forms, attach it to the paper return, and mail everything to the IRS.
  3. Don’t stop paying taxes. Even during a possible tax-related fraud incident, the individual should continue to keep paying their normal taxes, and file their income tax return by paper.
  4. Contact the FTC. Once they’ve completed all these steps, the individual can start resolving things with the IRS, contact the FTC, and file a complaint via identitytheft.gov.
  5. Place a fraud alert on your credit record. The individual should contact one among the three major credit reporting companies (Equifax, Experian, TransUnion) in order to place a fraud alert on their credit report.

Unfortunately, even once these steps have been taken by the victim, there are still ways for criminals to steal and use their identity. Further, new tax scams are emerging every year. There also are IRS imposter scams and situations, where thieves steal the child’s Social Security number (SSN) and claim them as a dependent for the victim’s returns.

Read More: About the Financial Action Task Force (FATF) organization.
Read More: What is the role of Money Laundering Reporting Officers (MLROs)?
Read More: Which countries are stated in the FATF Grey List?

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In the world of finance, reconciliation is the process of comparing two related sets of records or two accounts at the end of a specific accounting period to find out if account balances are matching ...

Lessons Not Well Learned: 2020 AML Fines Cross 2019 Total

If research is to be believed, institutions across the globe have not done enough in the anti-money laundering (AML) compliance area. Data from consultancy Duff & Phelps revealed that AML fines in...

Exploring AML Risks in COVID-Era and the Ways to Address Them

The world continues to battle the COVID-19 pandemic and the crisis it brought in is unprecedented in the history of humankind. While there are a number of pandemic-related factors contributing to the ...

AML Amid COVID-19: Watch out for These FBI-listed Fraud Schemes

There has been a rise in the number of cybercrimes and fraud schemes across the globe ever since the proliferation of the COVID-19 pandemic. Criminals, in general, are taking advantage of people’s s...

OCC Spring Risk Perspective: 5 Takeaways on Compliance Risk

Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...

How Criminals Used COVID-19 Sales Pitch to Defraud, Launder Money

As the world is working hard to contain the spread of the COVID-19, criminals continue to take advantage of the pandemic. They are devising sophisticated methods to defraud people and launder the crim...

5 Top Myths and Facts about AI Implementation in AML Programs

We are more confirmed about the power of Artificial Intelligence (AI) to transform lives and businesses now. There are countless possible applications of AI and machine learning at present, and we see...

Typology Repository Management: Solving AML Problems Via Collective Intelligence and Continuous Learning

Despite its general strength, the US federal banking system is apparently susceptible to the ongoing economic weakness caused by the rampant spread of coronavirus. Earlier this month, The US Office of...

Money Laundering Amid COVID-19: What Regulators Across Globe Say

As the world continues to fight against the COVID-19 pandemic, there are reports that criminals are taking advantage of the difficult situation. They are seizing the moment to proliferate their crimin...

How will Art Cease to Be a Preferred Money Laundering Vehicle?

Money laundering via high-end art and antiquities is not new yet it is difficult to detect. Art-related money laundering amounts to about US$3 billion per year, according to this blog, quoting the Uni...

Beware! Money Mules in Demand amid COVID-19. Here’s an Effective Cure

If reports are to be believed, cybercrooks are taking advantage of the COVID-19 situation. They are targeting people who were laid off or working from home due to the pandemic to work for them as mone...

How do we weather a tornado of change?

“Great works are performed not by strength but by perseverance” – Samuel Johnson All of us are in challenging times. However, we cannot afford to be lethargic to life, work, and busi...

Roundtable Rewind: Embracing Next-gen Tech & Collaboration Key to Sustainability

As a regtech player with a vision to enable sustainable compliance programs in financial institutions, Tookitaki organized a first-of-its-kind industry roundtable in Charlotte, NC, USA to discuss oppo...

Tookitaki Appoints Industry Veteran Joe Friscia as Advisor

Tookitaki Holding Pte. Ltd. appointed industry veteran Joe Friscia, former President of NICE Actimize and BAE Systems as Advisor to the Company’s Advisory Board. Joe brings over 25 years’ extensi...

Should Modern Machines Be Ethical?

There are mounting concerns across the globe about the reliability and safety of artificial intelligence (AI) based systems and its enabling technologies such as machine learning (ML). On the air are ...

Tookitaki Raises Another US$11.7 million in Series A; Closes Round at US$19.2 million

– by Abhishek Chatterjee, Founder & CEO The Tookitaki team and I are excited to announce that we have raised an additional US$11.7 million in Series A funding, taking the total investment in...

30 Years of FATF: Notable Facts About Global AML Watchdog

The Financial Action Task Force (FATF), the intergovernmental body formed in 1989 to combating money laundering, is celebrating its 30th anniversary this year. Since its inception, the global agency p...

Tookitaki Joins Aite Financial Crime Forum as Sponsor

Technological advances have fundamentally changed the operational landscape of financial institutions. However, there are also new risks emerging in forms of sophisticated financial frauds and complex...

Will Machine Learning Replace Compliance Professionals?

The impact of modern technologies such as artificial intelligence (AI) and machine learning on job security has been a widely discussed topic today. Of course, AI has advanced very quickly in the last...

6 Most Prevalent Cyber-Laundering Methods in APAC

Despite being a medium to exchange information in real-time and with scale, the Internet is being misused in several ways. Among the slew of financial crimes facilitated by the Internet, money launder...

What Made Us Earn the WEF Technology Pioneer Title

Tookitaki has bagged another global acknowledgement for its outstanding works in the regulatory compliance field. Our company was selected among hundreds of candidates as one of the World Economic Fo...

We Stay as a Team, We Win as a Team and We Flourish as a Team

“Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to a...

ABA Regulatory Compliance Conference: 10 Sessions You Can’t Miss

The 2019 edition of the American Bankers Association (ABA) Regulatory Compliance Conference is a few more days away. Organized by the Washington, D.C.-based trade association, the conference is touted...

Tookitaki AMLS Wins SBR Technology Excellence Award 2019

Tookitaki’s Anti-Money Laundering Suite (AMLS), an end-to-end machine learning-powered transaction monitoring and names screening solution, has bagged the inaugural Singapore Business Review Tec...

Watchdogs Grow Optimistic about AI Prospects at Banks

Proper regulation of banking operations is important as any failure in the banking system would affect the wider economy. Therefore, banking is one of the most regulated industries across the globe. F...

Pitfall of Black Box AI at Banks: Explaining Your Models to Regulators

The use cases of artificial intelligence (AI) and machine learning in front-office, middle-office and back-office activities at banks are growing slowly but steadily. The major areas of AI play includ...

AI for Regulatory Compliance at Banks: 4 Assessments Before You Okay the Solution Proposal

Banking is one of the industries where artificial intelligence and machine learning find their applications at a rapid pace. Regulatory compliance within banking is an area which has become a costly a...

We Believe in Innovation, the Key to Survival and Growth

“Innovation distinguishes between a leader and a follower.” -Steve Jobs What comes on the top of your screen when you google the meaning of the word innovation is – the introduction of somet...

Compliance Functions in Need of a Technological Overhaul. Can Machine Learning be the Game-Changer?

McKinsey in its latest compliance benchmarking survey found that compliance function at financial institutions has reached “an inflection point” and current compliance standards are in an “incho...

Tookitaki Raises US$7.5 mn Series A from Global VCs to Transform Regulatory Compliance

Tookitaki, a regulatory technology company that aims to enable financial institutions to develop sustainable compliance programs, has raised US$7.5 million in Series A round. The round was co-led by L...

From Wachovia to Danske Bank: Biggest Money Laundering Cases in Recent Times

Money laundering – the criminal activity of processing criminal proceeds to disguise their origin – is one of the gravest problems faced by the global economy, and its size is growing rapidly. It ...

A Modern Approach to Address the Reconciliation Challenges of Financial Services

Reconciliation of transactions is deemed critical for the smooth running of every financial institution. The speed and accuracy of data reconciliation can distinguish a successful institution from its...

Busting a Myth: Compliance Officer’s Job is All About Risk

Regulatory compliance has become a dreadful task for banks after regulators across the globe set stricter norms in the aftermath of the 2008 financial crisis in an effort to prevent financial crimes s...

SocGen Goes Next-Gen with Tookitaki Reconciliation Suite

Société Générale leveraged Tookitaki’s Reconciliation Suite to automate the bank’s existing break reconciliation system. Key Challenges Addressed The bank’s finance department was unable to ...

Attending ACAMS Conference in Singapore? Tookitaki Awaits You with Its Disruptive AML Solution

“In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it.”- Jeff Bezos Singapore is hosting ACAMS’...

MAS’ Stress on Transaction Monitoring for Effective AML/CFT Compliance and Machine Learning is the Answer

Singapore is known for its top-notch AML/CFT regime created through up-to-date legislation, stringent policy and uncompromising supervision to safeguard against the abuse of the city state’s financi...

Mifid II and the Pressing Need for a New Reconciliation Approach

The financial services industry in the EU has been confused with the introduction of a revamped version of the Markets in Financial Instruments Directive (Mifid II). The ambitious regulatory reforms t...

Is Automated Reconciliation Next to Impossible in Today’s Complex Financial World?

The 2008 global financial crisis and fairly new regulatory requirements like Basel III asked financial institutions (FIs) to cut operating costs and adopt a lean operations structure, pushing FIs to r...

Modern Tech to Reshape US AML Compliance with Regulators’ Recent Handshake

George Bernard Shaw once said: “Those who cannot change their minds cannot change anything.” The past week has seen a significant change of mind from financial regulators in the US in their ardent...

Skills Development: We Have Talents and We Strive to Multiply Them

“Mastery lies on an infinite continuum, and as a result, we will never reach the end. We can, however, see to it that we are as far along that continuum as our circumstance allows.” ― Chris Mat...

It’s Our Fourth Founding Day; Taking a Pause to Cherish Our Simple but Awesome Journey

Today, as we step into our 4th year of foundation, I feel proud and honored to be leading Tookitaki that has been successful in creating added value to all its stakeholders. I was never a CEO and Took...

Tookitaki Expands into the US with New Office in Charlotte

SINGAPORE, Sept. 24, 2018: Tookitaki Holding Pte Ltd, a leading regulatory technology company, is pleased to announce the official opening of its North American office in Charlotte, NC, in the Unite...

We Tame Machines but We Unleash Human Spirits

We are well aware of the fact that our progress as an organization is in the hands of our employees. The more energy, time and attention we invest in them, the more yield we receive. So, we always mak...

5 Methods That Modern Money Launderers Use To Beat Detection

Society prepares the crime, the criminal commits it. DID YOU KNOW? Every year, an estimated amount in the range of US$800 billion-US$2 trillion (2-5% of global GDP) is being laundered globally Regulat...

Risk Management Conference: Positive Vibes from All Corners

The Risk Management Association’s (RMA) premier annual event, the Risk Management Conference, came to an end on 6 November, and Tookitaki had the privilege to attend the event which we believe was ...

Singapore Fintech Festival: Tookitaki to showcase advanced machine learning solutions in financial services

Singapore is assured of the Fintech world’s unwavering attention next week, as the city state, is hosting this year’s Fintech Festival during 12-16 November. Touted as the world’s largest platfo...

The RMA Clarion Call to Address Risks and the Tookitaki Way

Risk officers, doing your best today is good while preparing hard for tomorrow is extraordinary. Risk management at banks has become difficult due to operational and regulatory changes. The Risk Manag...