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Tax season will open on Tuesday, January 19. This day also marks one of the busiest times of year for identity thieves looking to cash in by filing false tax returns. Tax identity theft is a growing issue and occurs when someone uses another individual’s Social Security number (SSN) to file a false tax return, claiming a fraudulent refund. In many cases, the taxpayer may not discover the fraud until attempting to file their taxes, only to find that someone else has already fraudulently filed for them and cashed their refund check. If the taxpayer files electronically, the second return will be rejected. If he files via the paper method, he will receive a letter notifying him that the return has already been filed for the tax year.

The Tax Identity Theft Problem

The problem of tax identity theft has grown exponentially over the years. In fact, the Internal Revenue Service indicates that this is the top fraud issue they deal with now. Though tax identity theft usually refers to a thief filing a fraudulent tax return, this type of fraud can include identity fraudsters using someone else’s SSN to assume the original holder’s identity for any reason. For example, the thief may use the original holder’s name and SSN to obtain credit cards, credit lines and utility accounts. The fraudster may even use the stolen SSN for employment purposes. A tax ID thief can even file for bankruptcy using your personal information. An identity thief can do a lot of damage with an individual’s SSN, name and a few other details.

Consequences for Victims of Tax Identity Theft

If an identity thief has filed a tax return using your SSN, you have an uphill battle ahead of you to getting your tax account straightened out. First, you must notify the IRS of the breach. Next, the IRS will require you to step through the process of proving your identity. According to a 2013 report by the US Department of the Treasury, victims of tax identity theft had to wait for an average of 312 days for the IRS to sort out the theft of their tax returns. In April of 2013, the federal government adopted the Identity Theft and Tax Fraud Prevention Act, which increased criminal penalties for perpetrators of tax ID fraud. The act also requires that the IRS issue the tax return to the rightful taxpayer within 90 days. The laws are moving in the right direction, however, the crime of tax identity theft is still on the rise in 2016.

Financial Impact of a Tax Identity Theft

If you have becomeare the victim of a tax identity theft, getting your data verified by the IRS and receiving your tax refund is only part of the equation. If your personal data has been compromised, an identity thief can use your SSN and personal information to open credit accounts, take out a mortgage and basically take over your financial life.

In spite of the efforts to thwart the problem, the IRS projects that approximately $21 billion will be stolen by tax identity thieves over the next five years. In 2013, an estimated $3.6 Billion was paid out by the IRS to tax identity thieves. In addition, another $385 million was refunded to those who used fraudulent tax identification numbers issued to workers from foreign countries who were employed in the US.

The most common category of people who have their tax ID numbers stolen and fraudulent returns filed is deceased people, followed by elderly individuals. The third most common group is students, ages 16 through 20, and the fourth group is children under age 14. Children, students and the elderly are easy targets for tax ID theft because they are usually not required to file an income tax return because their income is below the threshold requiring them to file.

Tax identity theft is a growing problem, and particularly for vulnerable groups. If you believe you may be a victim, you need to immediately take steps to protect your personal identity information. Check out our Identity Theft Education center for steps to mitigate identity theft, and what to do in the event you become a victim. Leave us your questions or comments in the section below, or share this with someone else.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal issues or financial issues involved with credit decisions.