Overview

Identity theft tax refund claims happen when someone files a federal (or state) tax return using your Social Security number (SSN) or other personal information to claim a refund. These incidents can delay your refund, trigger IRS holds, and sometimes cause employment or benefit complications. In my practice helping clients with tax and identity fraud since 2010, I’ve seen prompt action reduce resolution time and prevent repeat incidents.

(Authoritative sources: IRS Identity Theft Central, FTC IdentityTheft.gov, CFPB.)

Quick-action checklist (first 72 hours)

  • Confirm: Check whether the IRS contacted you about a suspicious return or you received a notice claiming a return was already filed. Save all notices.
  • Report to the IRS: Submit IRS Form 14039 (Identity Theft Affidavit) if someone filed a return using your SSN (IRS Identity Theft Central).
  • Protect credit: Place a fraud alert or credit freeze with the major bureaus (Equifax, Experian, TransUnion) and request free credit reports via AnnualCreditReport.com or at the CFPB guidance page.
  • Report to FTC: Use IdentityTheft.gov to create a recovery plan and generate an FTC Identity Theft Report.
  • Document everything: Record dates, phone numbers, names of IRS or agency representatives, and keep copies of all forms and correspondence.

How tax-related identity theft typically works

Fraudsters use stolen personal data (SSNs, date of birth, dependent info) to e-file a return and claim a refund or tax credit. They may also:

  • Direct refunds to a bank account they control by supplying routing/account numbers.
  • File returns that report false wages or withholding to complicate your records.
  • Use dependent information to claim credits that change your filing status.

Criminals often exploit data from breaches, phishing, public records, or old tax preparers. Filing early (before a criminal can) reduces the chance of fraud.

Signs you may be a victim

  • Receiving IRS Letter 5071C or similar identity verification notice.
  • Getting a notice that more than one return filed in your name.
  • Noticing unfamiliar tax transcripts, unexpected refund deposits, or missing wages on your Social Security earnings statement.
  • Being told by your tax preparer that your e-file is rejected because a return with your SSN was already filed.

If you see these, follow the Quick-action checklist above.

Step-by-step recovery process

1) File Form 14039 (Identity Theft Affidavit)

  • Use Form 14039 to inform the IRS of tax-related identity theft. You can download the form and follow IRS instructions at IRS Identity Theft Central (IRS.gov).
  • If the IRS instructs you to complete Form 14039, include supporting ID documents as directed. Keep copies of everything you send.

2) Follow IRS instructions and respond to notices

  • The IRS may place an identity theft indicator on your account and request additional documentation (copies of government ID, power of attorney, police reports, or signed statements).
  • If the IRS flagged your account and issued a paper-filing requirement, file the paper return and attach Form 14039 as instructed.

3) Request an Identity Protection PIN (IP PIN)

  • After addressing the immediate theft, enroll in the IRS IP PIN program to prevent future unauthorized e-filed returns using your SSN (see IRS Get an IP PIN).
  • The IP PIN is a six-digit number issued to eligible taxpayers; once active, it is required to e-file a return.

4) Protect your credit report and accounts

  • Place a fraud alert or freeze with each credit bureau. A freeze prevents new accounts from being opened in your name.
  • Dispute any unauthorized accounts or charges using bureau procedures and keep proof of disputes.
  • Consider using credit monitoring if sensitive data was exposed.

5) Report to the FTC and local law enforcement when appropriate

  • Create an IdentityTheft.gov recovery plan and file an FTC report. This generates an identity theft affidavit you can use with creditors and the IRS.
  • File a police report when the theft involves a known offender or when required for documentation.

6) Work with the IRS Identity Protection Specialized Unit (IPSU)

  • If the case is complex or your account was compromised repeatedly, the IRS may route you to the IPSU for specialized help.

What to expect from the IRS and timing

  • The IRS may place a hold on refunds while they verify identity; this can add weeks or months to resolution, depending on complexity.
  • The IRS will notify you by mail of required actions; the agency does not initiate contact by email or unsolicited phone calls asking for personal financial information.
  • Keep responding to IRS requests and supply clear copies of documents; organized documentation speeds resolution.

Recovering a stolen refund or correcting your tax record

  • If a refund was deposited to an account you don’t control, the Treasury Inspector General for Tax Administration (TIGTA) or financial institutions may be involved in recovery.
  • Often the IRS will reverse the fraudulent refund entry from their records and restore your legitimate return once identity is proven.
  • If the fraud affects wages or credits on file with SSA or state tax agencies, you may need to contact those agencies and provide proof to correct earnings or benefits records.

Special considerations for dependents, children, and small businesses

  • Children and dependents are common targets; file a protective return early for minors or obtain an IP PIN when available for dependent SSNs.
  • If your employer identification number (EIN) or business account is used fraudulently, contact the IRS Business & Specialty Tax Line and follow IRS business identity-theft guidance.

Prevention: reduce the risk next year

  • File early: E-filing early often blocks criminals who try to submit first.
  • Get an IP PIN: The IRS IP PIN prevents unauthorized e-filed returns once activated.
  • Secure personal data: Use a password manager, enable multi-factor authentication, and keep tax records and devices secure.
  • Vet tax preparers: Use an IRS PTIN-holding preparer, check credentials, and sign returns only after reviewing.
  • Shred documents that contain SSNs or tax data.

For more on prevention, see our guide: Protecting Against Identity Theft: The Financial Planner’s Guide.

Practical tips from my experience

In my practice, victims who acted within days of notification and who organized their documentation materially reduced the back-and-forth with the IRS. Prepare a single folder (digital and paper) with:

  • Copies of the IRS notice(s)
  • A copy of Form 14039 and any attachments
  • The FTC IdentityTheft.gov report
  • Proof of SSN ownership (SSA card or W-2) and government ID

Keeping that folder makes any later interactions with the IRS, state tax agencies, or creditors much smoother.

Where to get authoritative help

Also see our related resources: Identity Theft and Tax Returns: How to Respond to Fraud and Handling an Identity Theft Hold on Your Refund: Steps to Resolution for step-by-step guidance on interacting with the IRS.

Documentation and recordkeeping checklist

Retain copies of all communications until your account is fully cleared and for at least three years after resolution:

  • IRS notices, forms filed, and return copies
  • Copies of Form 14039 and supporting ID
  • FTC IdentityTheft.gov report and police report (if filed)
  • Credit bureau freeze/alert confirmations and dispute results
  • Correspondence with banks and creditors

Final notes and disclaimer

Identity theft tax refund claims are stressful but resolvable. Acting quickly, documenting steps, and using IRS and FTC resources are the most effective strategies. For complex situations or if you suspect a larger identity breach, consult a tax professional, identity-theft specialist, or an attorney. This article is educational and not a substitute for personalized legal, tax, or financial advice.

(Information current as of 2025. Sources: IRS Identity Theft Central; FTC IdentityTheft.gov; CFPB guidance.)