What is tax identity theft and why is it serious?

Tax identity theft occurs when a crook steals your tax information or important personal information (like your Social Security number) to file a fraudulent tax return or claim income in your name. This can cause you to lose government benefits, pay more tax than you should, or face other legal and financial problems.

This guide will help you understand: what tax identity theft is, how it typically happens, what warning signs to look for, how to avoid it, and what steps to take if you become a victim.

Note: This information is for educational purposes only and is not a substitute for financial or legal advice.

How it works
They can use your SSN to file a false tax return, claim falsified deductions, or understate income in order to illegally receive a refund.

In some cases, a fraudster uses your SSN to do work, causing their income to be reported to the IRS in your name, resulting in a higher tax burden or a notice of non-payment.

Common consequences
Losing the right to a legitimate tax refund.

Tax returns are rejected because of a false return.

Paying taxes on income you did not have.

The resolution process can take months, or even more than a year.

Personal information is used in other fraudulent activities.

Warning signs you may be a victim
Be alert if you experience one or more of the following situations:
The IRS notifies you of duplicate or unusual tax returns.

Receive a confirmation letter to create an IRS online account that you did not register for.

Unexpectedly receive a tax statement that you never requested.

Refund status is delayed, suspended, or redirected.

Tax returns show an unfamiliar employer name or EIN.

The IRS asks you to pay additional taxes on income that doesn’t belong to you.

In many cases, you only find out you’re a victim when the IRS directly contacts you about suspicious activity on your tax return, such as unusual deductions, underreported income, or improper unemployment claims.

Why is your tax return flagged for identity theft?

If the IRS suspects you’ve been targeted, they may send you a letter about identity theft. Depending on the type of letter, you’ll be asked to verify your identity in one of several ways:

5071C → Verify online

4883C → Verify by toll-free

5747C → Verify in person at an IRS office

What should you do if you’re a victim?
Finding out you are a victim of tax identity theft can be stressful and frustrating. However, the most important thing is to act quickly to regain control:

1. Report to the IRS
If you receive a notice from the IRS: Follow the instructions in the letter (5071C, 4883C, or 5747C).

If you discover it yourself: Complete and file Form 14039 (Identity Theft Affidavit).

You can also call the IRS at 800-908-4490 for direct assistance.

Also, report the incident to your state tax agency and file a report with the FTC at IdentityTheft.gov. This report will help you if you need to dispute fraudulent accounts.

2. Freeze your credit and monitor your account
Contact the big 3 credit bureaus (Equifax, Experian, TransUnion) to request a credit freeze. This prevents fraudsters from opening additional credit cards, taking out loans, or opening new accounts in your name.

You can still unfreeze your account if you need to borrow or open a legitimate account.

3. Close fraudulent accounts and secure your information
Close any tax or credit accounts that were opened illegally.

Contact relevant creditors to verify that you are a victim.

Secure legitimate accounts with strong passwords and two-factor authentication (2FA).

4. Report to Law Enforcement
While not required, reporting to your local police will help:
Have official documentation proving you were a victim.

Help with legal or financial disputes.

Help authorities investigate and stop the scammer.

How to Prevent Future Tax Identity Theft
File your taxes early: The IRS will process your returns first, reducing the risk of scammers filing first.

Sign up for an Identity Protection PIN (IP PIN): This is a unique 6-digit code issued by the IRS that is required when filing your taxes. It acts as an additional layer of authentication, preventing scammers from filing under your name.

Note: The IRS will never ask you for your IP PIN over the phone, via email, or text message. Only include your IP PIN on your legitimate tax return.

Tax identity theft can have lasting consequences, but if caught early and taken the right action, you can minimize the damage and regain control of your finances.

A Guide to Protecting Your Social Security Number (SSN) and Tax Information
Protecting your Social Security Number (SSN) is extremely important, as it is the key to many financial services, benefits, and tax records. If a crook obtains an SSN, they can commit identity theft, which can have serious financial and legal consequences. Here are steps you can take to keep your SSN and related data secure.

1. Protect Your Social Security Number
Do not use your SSN as your primary identification: Your SSN should only be used for official business or paperwork, not as a replacement for everyday ID.

Limit your SSN: Memorize your SSN instead of carrying it around. Only carry your card when you really need it, to avoid the risk of theft.

Do not read your SSN out loud in public: This can accidentally reveal information to people around you.

Do not enter your SSN on a public device: Public computers or public Wi-Fi pose a risk of being tracked and having your data stolen.

Do not provide your SSN over the phone: Reputable organizations will never ask for this information over the phone. If someone does, it is most likely a scam.

Report the loss of a wallet with your SSN: Notify the police and the Social Security Administration (SSA) to promptly handle the risk.

See also: What Identity Thieves Can Do with Your SSN.

2. Use VPN RICE when filing taxes online

HTTPS isn’t enough: Even though reputable tax filing platforms have HTTPS, you should still use a VPN to encrypt all data transmitted, including your SSN and tax account login information.

Prevent data theft: VPNs encrypt the connection between your device and the server, making it impossible for hackers to track or steal information.

Enhance privacy: VPNs mask your real location, protecting you when using public or shared networks.

File state taxes more securely: If you file at the state level, choose a VPN with servers in all 50 states to maintain privacy while maintaining access to local services.

3. Use strong passwords and two-factor authentication (2FA)
Strong passwords: Create long, hard-to-guess passwords that include uppercase, lowercase, numbers, and special characters.

Don’t reuse passwords: If one account is compromised, it’s easy for hackers to break into other accounts.

Enable 2FA: Add an extra layer of security with an OTP or biometrics to ensure no one can access your password alone.

Secure password management: Use a trusted password manager to create, store, and sync passwords across multiple devices.

4. Avoid scams and suspicious links
Don’t click on strange emails or links “from the IRS”: The IRS will not send emails asking for sensitive information.

Contact the IRS directly if in doubt: Visit the official website instead of clicking on links in emails/text messages.

Beware of enticing offers: For example, “win but need to enter SSN” – this is almost certainly a scam.

5. Check the tax preparer’s security
Third-party risks: Hackers may target tax preparers who do not have good security measures.

Confirm security measures: Ask how they collect, store, and protect customer data.

Refer to IRS Publication 4557: This document provides security standards that tax preparers must follow.

6. Use identity monitoring tools
Monitor the web and dark web: This tool helps detect early if your SSN or financial data is leaked.

Get timely alerts: You will be notified as soon as there are signs of a threat.

Identity theft insurance: Some services (such as ExpressVPN's Identity Defender, available to US users) also provide financial and legal support if you become a victim.

Conclusion
Your SSN is one of your most sensitive and important pieces of information. To protect yourself from identity theft and tax fraud:

Keep your SSN safe.

Use a VPN when filing taxes online.

Use strong passwords + enable 2FA.

Avoid scams.

Check with your tax preparer.

Actively monitor your identity.

Following the above steps in a coordinated manner will help you minimize the risk of information theft and protect your financial security in the long term.