Key Takeaways
- Tax identity theft occurs when someone uses your Social Security number or ITIN to file fraudulent returns, claim dependents, or steal refunds, often before you file.
- Early warning signs include IRS notices about actions you didn’t take, duplicate filings, unexpected income or wage records, and delayed refunds.
- Identity verification letters, unfamiliar IRS Online Account activity, and unauthorized transcript requests are strong indicators of tax identity theft.
- Dependents and deceased individuals’ Social Security numbers can also be targeted, leading to unexpected IRS notices.
- Immediate action is critical; respond to IRS notices, submit Form 14039, obtain an IP PIN, secure your IRS Online Account, and monitor credit reports.
- Year-round protection includes filing early, securing accounts with strong passwords and multi-factor authentication, safeguarding tax documents, and recognizing IRS imposter scams.
Tax identity theft is one of the fastest-growing forms of fraud, and most victims don’t realize anything is wrong until the IRS rejects their tax return or sends a notice about income they never earned. Because scammers often strike early in the filing season, your best defense is being able to spot the early signs of tax identity theft before major damage occurs. This in-depth guide breaks down the most common warning signs, what criminals do with stolen tax information, and the steps you should take immediately if you think your tax identity has been compromised.
What Makes Tax Identity Theft Different from Other Types of Identity Fraud
Tax identity theft is a unique type of identity crime because the IRS, not banks or credit bureaus, is often the first entity to detect something abnormal. Understanding how tax identity theft works helps you recognize suspicious activity sooner.
How Tax Identity Theft Works
Tax identity theft occurs when someone uses your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) to file a federal or state tax return, claim false dependents, obtain a fraudulent refund, or access your IRS account.
Unlike credit identity theft, which usually involves opening loans or credit cards, tax-related theft focuses on refund fraud. By the time you attempt to file your legitimate return, scammers may have already taken your refund, altered income information, or created false employer records in your name.
Why Criminals Target Tax Identity Information
Stolen tax information can be extremely profitable. Criminals can:
- File inflated tax returns for large refunds
- Claim fraudulent dependents
- Access your IRS Online Account
- Request transcripts containing detailed financial data
- Use wage information to apply for government benefits
Because of these risks, recognizing the early signs of tax identity theft is crucial.
10 Warning Signs of Tax Identity Theft You Shouldn’t Ignore
These warning signs often appear before the IRS officially confirms fraud. If you notice any of them, take action immediately to prevent further damage.
The IRS Says a Tax Return Has Already Been Filed in Your Name
One of the clearest signs of tax identity theft is when the IRS rejects your electronically filed tax return because their system shows one has already been submitted using your Social Security number. This usually means a criminal filed a fraudulent return early in the season to claim your refund before you had the chance. Scammers often rush to file in January or early February, hoping to beat legitimate taxpayers and slip through before fraud filters strengthen. If you receive a “duplicate SSN” rejection message, it almost always signals that someone else has used your personal information to file a false return.
You Receive IRS Letters About Actions You Didn’t Take
Another major red flag is receiving an unexpected IRS letter about activity you didn’t initiate. The IRS communicates important issues exclusively by mail, so any letter referencing identity verification, unreported income, missing tax information, or suspicious account activity deserves immediate attention. For example, notices such as a 5071C or 4883C often indicate that the IRS has flagged your return for potential fraud and needs to confirm whether you filed it. If you haven’t filed yet, or the information referenced doesn’t match your actual income, this strongly suggests someone else is using your identity.
IRS Wage or Income Records Show Income You Never Received
Sometimes the first sign of tax identity theft is discovering that the IRS has income on file that you never earned. This usually occurs when scammers use your SSN to gain employment or fabricate wages that appear on W-2s or 1099s. When employers submit these records to the IRS, they are automatically linked to your tax account, triggering discrepancies later. Many victims learn about this issue only when the IRS sends a notice stating they failed to report tens of thousands of dollars in unfamiliar wages. If your transcripts or notices show income from companies you’ve never worked for, someone may be using your identity for employment-related fraud.
You’re Told You Owe Additional Tax You Don’t Expect
When criminals file fraudulent returns using fabricated income or deductions, the inconsistencies eventually show up in IRS processing systems. As a result, some taxpayers receive unexpected tax bills, penalty notices, or “math error” adjustments tied to a return they never filed. This can happen months after the fraudulent return was submitted, which can make it even more confusing. If the IRS claims you owe taxes for income you didn’t report or deductions you never claimed, it’s often a sign that someone else used your SSN to file a manipulated return that artificially inflated income or credits.
Your Tax Refund Is Delayed for No Clear Reason
While tax refund delays are common, unusually long or unexplained delays can be a sign that your return is under additional scrutiny. When the IRS suspects possible identity fraud, it may freeze your refund, route your return to a manual review, or delay processing until your identity can be verified. Many victims check “Where’s My Refund?” for weeks only to see the same generic “processing” message because the IRS placed a hold on the account. If you filed early and still don’t receive updates after an extended period, your return may have triggered an identity verification hold linked to fraud.
You Receive Identity Verification Requests You Didn’t Expect
If the IRS sends you a letter asking you to verify your identity but you haven’t filed your tax return yet, that’s a major warning sign. Identity verification letters, such as the 5071C, are issued when the IRS has reason to believe a return filed under your SSN may not be legitimate. If the IRS asks you to confirm information tied to a return you didn’t submit, it almost certainly means someone else filed with your identity. The timing is important: receiving a verification notice early in the tax season, especially before you’ve filed, indicates someone attempted to impersonate you to claim your refund.
You Notice New IRS Online Accounts You Didn’t Create
Another subtle but serious sign of tax identity theft is discovering that an IRS Online Account has been created using your personal information. Scammers sometimes attempt to register an account before the victim does, giving them access to transcripts, refund routing, and sensitive tax data. Some people only discover this when they try to set up an account and learn one already exists. If you begin receiving unfamiliar log-in notifications, password change alerts, or confirmation emails for updates you never made, someone may have gained access to your IRS tax profile.
You Receive Tax Transcripts You Never Requested
Tax transcripts contain detailed personal and financial information, making them valuable to criminals attempting to file convincing fraudulent returns. If you receive a mailing or email confirmation stating that an IRS transcript has been requested on your behalf, especially if you haven’t taken that action, it’s a strong sign someone attempted to access your tax information. Fraudsters use transcripts to capture your prior-year Adjusted Gross Income (AGI), wage data, and filing history, allowing them to mimic your legitimate return and bypass security filters.
You Receive IRS Notices for Dependents or Deceased Individuals
Identity thieves often target dependents, children, or deceased relatives because their Social Security numbers are less frequently monitored. If the IRS notifies you that a dependent on your return has already been claimed by someone else, or you receive notices about credits linked to a child you did not claim, it may indicate that someone is using your dependent’s SSN. Similarly, if you begin receiving IRS mail addressed to a deceased family member, especially mail referencing newly filed tax returns, that can signal fraudulent activity. These cases often slip through the cracks because people rarely expect identity theft to affect dependents or the deceased.
You Spot Unfamiliar Activity in Your IRS Account or Tax Records
Any unexpected activity tied to your IRS tax account should be taken seriously, even if it seems minor. This can include updated contact information you didn’t change, new bank accounts listed for refund deposits, or prior-year returns appearing in your transcript that you never filed. Some taxpayers also receive alerts about login attempts or security lockouts they never triggered. These subtle signals often indicate a criminal is attempting to access your account or prepare it for fraudulent filing. If anything in your tax records feels unfamiliar or out of place, it’s worth investigating. These discrepancies can be early indicators of tax identity theft.
What To Do Immediately If You Spot a Warning Sign
If you observe any signs of tax identity theft, act quickly to prevent further damage.
- Respond to IRS Notices Promptly: Always follow the instructions listed on the notice. The IRS will never ask you to respond by email or text.
- Submit Form 14039: Identity Theft Affidavit: This form notifies the IRS that someone used your SSN fraudulently. Once filed, the IRS flags your account for protection.
- Obtain an Identity Protection PIN (IP PIN): An IP PIN is a six-digit code that prevents anyone from filing a tax return under your SSN without the PIN.
- Create or Secure Your IRS Online Account: If you haven’t created an account yet, do so before criminals beat you to it.
- Report the Fraud to IdentityTheft.gov: This provides you with a personalized recovery plan and official documentation.
- Monitor Your Credit Reports: Although tax identity theft differs from credit fraud, both can occur together.
How To Protect Yourself From Tax Identity Theft Year-Round
Protecting your tax identity isn’t something that should happen only during filing season. The most effective strategy is maintaining ongoing habits that reduce your exposure to fraud. By taking small proactive steps throughout the year, you can significantly lower the risk of someone using your Social Security number to file a fraudulent return.
File Early Each Year
Filing as early as possible remains one of the best defenses against tax identity theft. Criminals often attempt to file fraudulent returns in January or early February. When you file early, you narrow the window of opportunity for anyone else to submit a return under your name before you do.
Strengthen Your Account Security
Creating strong, unique passwords and enabling multi-factor authentication on your IRS Online Account and tax software adds an essential barrier to unauthorized access. These simple steps make it harder for cybercriminals to break into your accounts, even if they obtain some of your personal information.
Be Careful With Tax Documents
You should also be mindful about how and where you store sensitive tax records. Avoid saving tax documents to shared devices, cloud folders, or email drafts that could be accessed by others. When you dispose of old tax paperwork, use a shredder so sensitive data can’t be recovered. These small habits go a long way in protecting your privacy.
Know How the IRS Really Contacts You
Another critical step is understanding how the IRS communicates. The IRS will never call unexpectedly demanding immediate payment, send threatening texts, or email you asking for financial information. If a message seems urgent, aggressive, or out of the blue, assume it’s fraudulent. Knowing this can help you quickly spot phishing attempts designed to steal your tax data.
Protect Your Dependents’ Information
Children and dependents are common targets for identity thieves because their Social Security numbers are rarely monitored. Requesting an Identity Protection PIN (IP PIN) for each dependent adds a layer of protection that prevents anyone from filing a tax return using their identity. This step is especially important for families who have had security breaches in the past or who frequently move or change schools.
How To Identify IRS Imposters and Avoid Scams
IRS imposter scams are one of the most common ways criminals steal tax identities. Scammers mimic the IRS to pressure victims into revealing personal information, paying fake debts, or clicking malicious links. Understanding how these scams operate makes it easier to filter out fraudulent messages before they cause harm.
Common Signs of an IRS Imposter Scam
While scammers constantly change tactics, many IRS impersonation attempts share similar characteristics. You might receive phone calls claiming you owe back taxes, emails that appear official but link to fake IRS websites, or text messages containing refund “updates” with malicious links. Some scams even include fake transcripts or notices designed to trick you into opening malware-infected attachments.
How the IRS Actually Communicates
A simple rule helps eliminate most confusion: the IRS does not initiate contact by phone, text, or email asking for personal or financial information. Real IRS communication almost always begins with a letter delivered by mail. If you receive a message that uses threats, demands immediate payment, or instructs you to click a link, you can be confident it is not legitimate.
What To Do If You’re Unsure
If you receive a suspicious message, do not click any links or respond directly. Instead, verify the communication by contacting the IRS using the official phone number listed on the IRS website. This allows you to confirm whether the notice is real without risking exposure to a scam. When in doubt, scammers rely on urgency and surprise to trick taxpayers into giving up sensitive information.
Frequently Asked Questions
What are the warning signs for tax identity theft?
Warning signs include IRS notices for unfiled or duplicate returns, unexpected income or wage records, delayed refunds, identity verification requests, unfamiliar IRS Online Account activity, and fraudulent claims on dependents or deceased individuals.
How do I check if my SSN has been compromised?
You can monitor your Social Security number by reviewing IRS transcripts, checking credit reports with all three major bureaus, setting up fraud alerts, and using IdentityTheft.gov to report suspicious activity or suspected tax fraud.
What is the most common form of identity theft?
Tax identity theft is among the fastest-growing types, but the most common overall is credit or financial identity theft, where criminals use personal information to open accounts, make purchases, or apply for loans in someone else’s name.
Who has access to my IRS records?
Your IRS records are only accessible by you, authorized representatives, and the IRS. Scammers or third parties attempting to view or manipulate your account without authorization are committing fraud.
Tax Help for People Who Owe
Tax identity theft can derail your tax season, delay your refund, and expose your financial information to criminals. By staying aware of the early signs of tax identity theft, from unexpected IRS notices to duplicate filings, you can act swiftly to protect your refund and your financial wellbeing. The faster you respond, the easier it is to contain the damage and regain control of your IRS account. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers.
If You Need Tax Help, Contact Us Today for a Free Consultation