Identity theft can be a huge headache, especially when it affects your federal tax record. There are at least a couple ways how that might happen. An identity thief may use your personal identifying information, including your social security number, to file a false tax return and obtain a fraudulent refund. Or a thief may use your identity to obtain a job, claim the maximum number of exemptions, and basically collect tax-free income. Then, these W-2 wages are reported to the IRS under your social security number. When the information on your legitimate tax return does not match up with the W-2s the IRS has on file (i.e., when you fail to report the income earned by the identity thief) then the IRS sends you a letter asking you to explain the discrepancy.
The IRS provides a comprehensive list of tips for those whose identity has been stolen. However, some of their most useful tips explain how to avoid identity theft in the first place. What it all comes down to is safeguarding your personal and financial information, including your credit cards, social security number, even address.
Some identity thieves steal wallets and purses. Protect your personal effects when you carry them around and never leave them in open sight in your vehicle. Never leave a bag or purse unattended in a store or airport. It is human nature to misplace small items such as these, but we tend to be very habitual in the handling of our wallets and purses. The more safe habits we can acquire, the better, so that it becomes second nature to protect our personal effects.
Some identity thieves try to obtain information from you through a phone call or electronic means (especially emails). The IRS has issued extensive and repeated warnings regarding phony IRS emails and phone calls. The IRS has made it abundantly clear that they do not contact taxpayers through email and they do not request credit card information over the phone. It is actually really easy to identify a phony IRS contact if you know what to look for, but very easy to be deceived if you don’t.
Some identity thieves sift through your trash. Once you take your trash out to the curb, it is easy to consider it “gone,” but that is usually the point at which the identity thief just begins his work. The idea here is to take steps to destroy identifying information before you throw it in the trash can. Invest in a good quality shredder and make a habit of shredding anything with your name on it.
Some identity thieves obtain your information through unsecured websites. Do not share your personal and/or financial information on obscure, unknown websites that cannot be trusted. If you’re making purchases online, stick with the big time, well known websites like Amazon, eBay, and nationwide retailers. If you ever have a question as to whether a website can be trusted, do a quick Google search of the company or, better yet, just move along to something else.