There are now a few new weapons to help you battle identity theft. A federal law gives consumers the right to receive a copy of your credit report once every 12 months free of charge, or if you are refused credit on an application. This law was designed to encourage Americans to keep a closer watch on their credit report and cut back on identity theft.
Credit Reporting Bureaus
Equifax, TransUnion, and Experian, each are required to provide you with an annual credit file disclosure or report upon request (therefore you must ask for it). Now there are some credit card companies that freely give your credit score on the monthly credit card statements. On others, you must still request and pay, though, to get a credit score. It is not part of the new free credit report annual provision.
IRS Handling of Identity Theft
The Treasury Inspector General for Tax Administration (TIGTA) reported that the Internal Revenue Service (IRS) failed to investigate thousands of identity theft cases, because taxpayers filed an incorrect tax return. The IRS used to use Form 3949-A (Information Referral) to report suspected cases of tax fraud in 2012. However, the instructions were very confusing, and many people used this form to report identity theft cases. The IRS destroyed those forms because prior to May 2012, there were no procedures in place to process them as identity theft cases.
Today there are now current IRS procedures in place that allow for Form 3949-A to be accepted as a report for identity theft. If you use this form, you must attach a copy of your police report and valid identification. If you want to report identity theft without sending a copy of your police report and picture identification, the IRS accepts Form 14039 (Identity Theft Affidavit). As soon as you find out your identity has been compromised, you should contact the IRS immediately, along with Credit Reporting Agencies, and your ID theft insurance company; if you have that coverage.
You can report this to the IRS either separately or attached to your tax return. Be sure to also contact everyone you bank with, do business with, and file personal information with about the ID theft. Credit bureau reporting is MORE than just reporting credit card usage and history. It includes ALL types of credit activity. Any type of loan, Tax returns, Health insurance and Medicare coverages, Driver’s License, Passport and Social Security information all use credit activity to validate your access to them.
How can we protect themselves from identity theft? Keep these tips from “idexpertscorp.com” in mind:
You may also use either a Credit Freeze or a Fraud Alert on your credit account at the reporting agencies to stop the further use of your information to acquire financial access of your accounts. Each Credit Reporting agency will charge a monthly fee for a Credit Freeze, while a Fraud Alert is usually free, for all three. And a Fraud Alert is only necessary to send to one credit agency, (www.experian.com/fraud) because the other two will be notified. Either method will slow down your use of credit, going forward because you will need to approve or verify your identity before your credit purchase will be accepted. SO, remember, this will slow your use of credit!
Income Tax and Social Security Impact of Identity Theft
Remember this, Reporting Identity Theft to the IRS will delay your refund, but it will also ensure that you receive it rather than the ID thief. Chances are you will receive a check, rather than direct deposit refund into your checking or savings account. Also, you will receive an ID Theft personal identification number (PIN) to use when filing future returns to ensure your return is the correct one.
If you end up spending money to prosecute an identity thief, either through attorney’s fees or other fines, the out of pocket money could be considered a Casualty Loss. This could be an allowed deduction on your personal tax return. Casualty losses are given a better tax deduction than a normal itemized deduction. It is considered an Ordinary Loss, is not subject to Alternative Minimum Taxes, and could help you reduce your tax liability against any other income you might have.
Further, if you are a victim of identity theft, you must paper file your tax return. You cannot e-file your return!! Be sure to attach a completed and signed IRS Form 14039, along with a copy of your current driver’s license or passport, to be submitted with your original tax return. This will ensure your refund is sent to you and your tax records are correctly placed in your name.
This is also important to make sure your Social Security records reflect correct information towards your benefits later in life.
Here are several steps the IRS suggests you can take to help protect yourself against identity theft:
Here are some final points to remember:
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