SLADE COLUMN: ID theft? There’s a form for that
Last year the Internal Revenue Service processed about 1.5 million fraudulent tax returns, a federal audit found, costing taxpayers billions of dollars and preventing some people from receiving refunds they were owed in a timely manner.
So, the millions of South Carolina residents whose Social Security numbers were hacked from state Department of Revenue computers in October may be wondering if they should worry about tax fraud.
It turns out, the IRS has a form for that.
In this column, I’ll take a look at the pros and cons of filing an “affidavit of identity theft” with the federal tax agency, and recap the steps people can take to deal with South Carolina’s massive data breach.
Fraudulent tax returns are typically filed, auditors have found, using the Social Security numbers of poor people who don’t typically file returns, or dead people, or children. The scammers file fake returns and claim refunds.
For those who have been victimized by identity theft, the IRS has a form that people can fill out, and typically they will receive a personal identification number to use along with their Social Security number with their tax filing.
One option on the form is to check a box that says: “I am a potential victim of identity theft and believe I may be at risk for future impact to my tax account.”
Should I file?
So, should people in South Carolina who are “potential victims” fill out these forms? Probably not, and here’s why:
Despite the language used on the form, the IRS says the affidavits are primarily meant for people who have become victims of identity theft or have a clear reason for suspicion, such as unexplained credit report requests or bank charges. And the agency processes the forms manually, so it may already be too late to get a PIN code for the upcoming 2012 tax filing.
It’s clear the agency does not want large numbers of South Carolina residents sending in these forms, and as of late last week, there was no evidence of identity theft directly related to South Carolina’s data breach.
“At this early point, there is no action that South Carolina taxpayers need to take with the IRS regarding their federal tax returns,” said Bill Cressman, a senior IRS manager. “The form is designed for more isolated instances of identity theft, such as people losing a wallet, rather than large-scale data breaches such as what occurred in South Carolina.”
I believe that some time down the road, the IRS may have to issue PIN codes to all taxpayers, because Social Security numbers can’t easily be changed, and data thefts are widespread.
What to do?
South Carolina’s data breach involving Social Security numbers, credit and debit card numbers, bank account information and business data raises concerns that identity thieves could use the information to obtain credit in the names of potential victims, or try to steal funds from existing accounts.
Those are more immediate concerns than tax refund fraud, and here’s a recap of steps people can take to protect their identities and their finances:
Monitor your credit:
The state has offered to sign residents up for a free year of credit monitoring, and there’s no reason not to take advantage of that service. If you pay taxes in South Carolina, you’re paying for it anyway.
Sign up for Experian’s ProtectMyID service online at protectmyid.com/scdor using activation code SCDOR123. Each adult taxpayer should sign up, and about two weeks later Experian will provide instructions on how to enroll any dependents, according to the governor’s office.
There’s also a toll-free number for signing up, 866-578-5422, but callers have reported great difficulty getting through, so sign up online if you can.
The ProtectMyID service will let you know of attempts to obtain credit in your name, and if someone does steal your identity, the service offers insurance and assistance with resolving ID theft problems.
You also can review your credit reports at no cost once a year at www.annualcreditreport.com or by calling 877-322-8228, regardless of whether you sign up with Experian. That’s a federal law.
Place a fraud alert:
A free, 90-day fraud alert with credit bureaus tells potential credit issuers to take additional steps to confirm your identity. Call Equifax at 800-525-6285, Experian at 888-397-3742 or TransUnion at 800-680-7289. You only have to call one because the other two will be notified. If you seek a loan or new credit while a fraud alert is in place, you will need to take extra steps to confirm your identity.
Consider a freeze:
Placing a security freeze on your credit reports is the best way to prevent people (including yourself) from establishing new lines of credit and loans in your name. Under South Carolina law, credit bureaus can’t charge you a fee for placing or lifting a freeze. If you have no plans to take out loans or sign up for new credit cards, a security freeze is your maximum security option.
Reach David Slade at 937-5552 or Twitter @DSladeNews.