Why tax identity theft matters

Tax-related identity theft happens when a criminal uses your personal information — most often your Social Security number (SSN) — to file a tax return and claim a refund in your name. The immediate harm is a stolen refund, but the secondary effects are longer: delayed refunds for legitimate filers, extra documentation to prove your identity to the IRS, and possible damage to credit if criminals use your data for other fraud.

Authoritative guidance from the IRS and the Federal Trade Commission (FTC) shows tax identity theft remains a serious, ongoing problem (IRS: Identity Theft Information for Taxpayers; FTC: Identity Theft resources). The IRS recommends specific protections such as the Identity Protection PIN (IP PIN) program and steps victims should take if fraud occurs (see IRS Get an Identity Protection PIN and IRS Identity Theft information for taxpayers).

In my work advising clients, the most common mistakes I see are waiting to file until late in the season, using weak passwords for tax-prep and email accounts, and not responding quickly to IRS identity verification notices. Early, methodical protection and prompt action if something goes wrong dramatically reduce stress and speed resolution.

Common ways criminals target taxpayers

  • Phishing emails and text messages that mimic tax services or the IRS to harvest login credentials.
  • Data breaches at businesses or tax preparers that leak SSNs and account information.
  • Mail theft (tax documents, W-2s) that exposes employer and income data.
  • Social engineering through phone calls pretending to be the IRS or a bank.

Because many of these risks exist year-round, protecting tax data is not just a “tax season” problem — treat your tax identity like any other high-value piece of personal information.

Practical prevention steps you should use now

  1. File early, when you can. Filing as soon as you have the needed documents reduces the window in which a thief can file a return in your name and claim your refund.

  2. Enroll in the IRS Identity Protection PIN (IP PIN) program if eligible. An IP PIN is a six-digit code the IRS uses to confirm your identity and prevent fraudulent electronic filing. Learn more and apply at the IRS Get an Identity Protection PIN page (IRS).

  3. Require strong, unique passwords and multi-factor authentication (MFA) for any account tied to taxes: IRS Online Account, tax-preparation software (e.g., TurboTax, TaxAct), email, and your primary bank.

  4. Work only with reputable tax preparers. Confirm preparers have professional credentials (EA, CPA, or attorney) and a secure process for storing your records. If you use an online preparer, check for HTTPS, a privacy policy, and strong authentication.

  5. Protect paper records. Shred W-2s, 1099s, and other documents you no longer need. Store current-year tax returns and prior-year records in a locked, fire-resistant box or encrypted cloud storage.

  6. Freeze or monitor your credit. A credit freeze restricts new accounts from being opened in your name. Fraud alerts let lenders know to verify identity before approving credit. Free credit reports are available at AnnualCreditReport.com (FTC).

  7. Keep devices and networks secure. Use up-to-date antivirus software, install system updates promptly, and avoid public Wi‑Fi when logging into tax or financial accounts.

  8. Avoid sharing your SSN unless legally required. Ask whether another identifier can be used and verify the recipient’s identity before providing the number.

  9. Use the IRS’s online account tools carefully. An IRS Online Account is helpful to check your transcript and notice history, but protect your login like any sensitive account (MFA, strong password).

  10. Consider paid monitoring prudently. Identity-theft services can add convenience during recovery, but they’re not a substitute for the core actions above (credit freezes, IP PIN, prompt filing).

Relevant FinHelp guides: see our Identity Theft: Prevention and Recovery Steps and How to Protect Your Refund from Identity Theft: Immediate Steps for additional tools and checklists (internal links below).

If the IRS rejects your e-file or sends an ID verification letter

The IRS may reject an e-filed return if someone else already filed using your SSN, or it may send a verification notice (for example letter 5071C) asking you to confirm your identity online or by phone. When you receive an IRS identity verification request, follow the IRS instructions exactly; avoid calling phone numbers in unsolicited messages and use the phone numbers on IRS letters or the IRS.gov site.

Immediate actions:

  • Don’t ignore the notice — respond promptly to the IRS per the instructions on the letter. If the notice asks you to verify identity online, use the IRS secure verification tools.
  • If your return is rejected because of a duplicate filing, file IRS Form 14039 (Identity Theft Affidavit) if the IRS requests it or if you are told your e-file was rejected and you suspect tax-related identity theft. The IRS page for Form 14039 explains when and how to submit it.
  • If the IRS directs you to verify identity in person or via an IRS partner, follow the specified steps rather than clicking links in emails or texts.

For step-by-step guidance on responding safely to IRS identity verification requests, see our How to Handle an IRS Identity Verification Request Safely (internal link).

What to do if someone already filed in your name

  1. File an identity-theft report at IdentityTheft.gov (FTC). This creates a recovery plan and generates an FTC Identity Theft Report you can use when working with credit bureaus and the IRS.

  2. Submit IRS Form 14039 if the IRS asks you to do so. Keep copies of any IRS letters and the completed Form 14039.

  3. Contact the tax preparer or software company you used (if applicable) and tell them an identity theft event affected your account.

  4. Place a credit freeze with all three major credit bureaus (Equifax, Experian, TransUnion) and request fraud alerts if you prefer.

  5. File a police report if your local law enforcement requires one for identity-theft claims or if a crime occurred in your physical location (e.g., mail theft).

  6. Track the IRS case. The process can take weeks to months depending on the caseload. The IRS will not issue a refund until it resolves identity concerns. While this delay is frustrating, cooperating and providing requested documentation speeds resolution.

  7. Consider using paid identity recovery services for complex cases — but begin with the free federal resources (IdentityTheft.gov and IRS Form 14039) before spending money.

Related FinHelp articles: Steps to Recover Your Tax Account After Identity Theft and Handling an Identity Theft Hold on Your Refund: Steps to Resolution.

A sample timeline for resolution (typical but not guaranteed)

  • Week 0: You discover a rejected e-file or receive an IRS verification letter.
  • Week 1–2: You submit required documents (Form 14039, identity documents) and file an FTC report.
  • Weeks 3–12: The IRS investigates and may request additional documents. During this time your refund may be delayed.
  • 3+ months: If the IRS confirms you are a victim, they will clear your account and process the legitimate return. If needed, they will advise next steps for future filings (e.g., IP PIN enrollment).

Note: Actual timelines vary widely. Some cases resolve faster; others take longer when multiple agencies or cross-state crime are involved.

Practical checklist you can use today

  • File your tax return early if you have the correct documents.
  • Apply for an IP PIN at the IRS if you’re eligible (or after you are confirmed a victim).
  • Lock down accounts with unique passwords and MFA.
  • Shred and securely store tax documents.
  • Enroll in credit freezes or fraud alerts if you suspect exposure.
  • Save all IRS notices and respond by the deadlines provided.

Useful authoritative resources

Internal resources and further reading

Professional note: In my 15+ years working with individuals on tax and identity issues, clients who take a few simple steps — file early, use an IP PIN, and secure accounts with MFA — avoid most painful delays. If you’re already dealing with theft, patience and thorough documentation are the fastest path to recovery.

Disclaimer: This article is educational and does not substitute for legal or tax advice. For personalized help, consult a qualified tax professional or attorney. For immediate reporting and a federal recovery plan, start at IdentityTheft.gov and follow IRS instructions for Form 14039.