As we noted in our prior posts, many people don’t think about their upcoming tax returns in August. After all, tax season is about six months away, and most consumers are thinking about maximizing their spending power for Labor Day weekend sales. Nevertheless, tax questions and problems are being resolved (or at least attempted to be resolved) right now.
One of the major issues facing regulators is the specter of identity theft with regard to tax returns. Essentially, a taxpayer’s name and social security number can be stolen and used to file a fraudulent tax return and a possible refund is diverted to a crook’s bank account; all without the real person (or the federal government) knowing that fraud has occurred.
According to the Government Accountability Office (GAO) nearly six billion dollars are lost each year through identity fraud applied through phony tax returns. Additionally, the Internal Revenue Service recently announced that its “Get Transcript” system was recently hacked, which caused more than 300,000 tax returns to be illegally accessed, which is likely to contribute to more fraud in the coming tax year.
In response to this, the IRS has implemented measures that will apply nearly two years from now that will remove the 30 day extension that employers have to file W-2 documents in order to reduce the potential for identity theft. However, this may not be enough, given that W-2’s are not filed with the IRS. Instead, they are filed with the Social Security Administration.
With that said, taxpayers are encouraged to file their income tax returns as soon as possible in order to minimize the risk of identity theft.