Tax Return Fraud: What It Is, How It Happens, and What To Do If You’re Affected
Tax season is already stressful enough without worrying about fraud. Unfortunately, tax-related identity theft and fraudulent filings have become increasingly common as criminals look for ways to steal personal information and claim refunds that aren’t theirs.
While the IRS has strengthened its systems over the years, tax return fraud remains something taxpayers should understand — not because it’s likely to happen, but because knowing the signs can help you respond quickly if it does.
What Tax Return Fraud Looks Like
Tax return fraud typically occurs when someone uses another person’s Social Security number to file a tax return and claim a refund. The goal is simple: file first, collect the refund, and disappear before the real taxpayer files their legitimate return.
In many cases, the victim doesn’t even realize anything is wrong until they attempt to file their own tax return and discover that the IRS has already received one under their Social Security number.
Other warning signs may include receiving an unexpected IRS notice indicating that:
- Multiple tax returns were filed using your Social Security number
- You have wages from an employer you don’t recognize
- You owe additional tax related to income you never received
- IRS records show activity on your account that you did not initiate
These situations can feel alarming, but they are usually resolvable once the issue is reported.
How Personal Information Gets Stolen
Most tax fraud begins with identity theft. Criminals may obtain personal information through phishing emails, hacked databases, stolen mail, or compromised online accounts.
Once they have enough identifying information — typically a Social Security number and basic personal details — they can attempt to file a fraudulent tax return early in the season before the legitimate taxpayer files.
This is why protecting personal information year-round is one of the most effective defenses against tax fraud.
What To Do If You Suspect Tax Fraud
If you believe someone has used your identity to file a fraudulent tax return, the IRS recommends taking action as soon as possible.
Start by notifying the IRS and following their identity theft reporting procedures. The agency may ask you to complete an Identity Theft Affidavit (Form 14039) and provide documentation verifying your identity so they can investigate the issue.
In addition, it’s often wise to review your credit reports and consider placing a fraud alert or credit freeze with the major credit bureaus to help prevent additional misuse of your information.
The IRS also maintains a reporting process for suspected tax fraud schemes, including individuals or organizations preparing fraudulent returns. Information can be submitted directly through the IRS fraud reporting process.
A Simple Step That Adds Protection: The IRS IP PIN
One tool the IRS offers to help prevent fraudulent filings is the Identity Protection Personal Identification Number (IP PIN) program.
An IP PIN is a six-digit number assigned to a taxpayer that must be included on their tax return before the IRS will accept the filing. Because criminals generally do not have access to this number, it creates an additional layer of protection against fraudulent filings.
Many taxpayers now choose to opt into the program voluntarily, even if they have never experienced identity theft. Once you register for an IP PIN, note that you receive a new number each year. The number must be included on your tax return. If it's not provided, the electronic submission will fail.
Prevention Still Matters
While no system can eliminate fraud entirely, several simple habits can significantly reduce risk:
Protecting Social Security numbers and tax documents, using secure portals for financial information, avoiding suspicious emails requesting personal data, and filing tax returns early in the season can all help limit opportunities for fraud.
The earlier a legitimate return is filed, the less opportunity a criminal has to submit a fraudulent one.
A Final Thought
Fraud is frustrating, but it is also something the IRS deals with regularly. Systems are in place to correct fraudulent filings and restore the legitimate taxpayer’s record.
The most important step is awareness. Knowing the warning signs and understanding how to respond can make the process much smoother if a problem arises.
If you ever receive an unexpected IRS notice or see something unusual on your tax records, it’s worth taking a closer look. Addressing issues early can prevent larger complications later.
