What Can Someone Do With Your Tax ID Number?

A tax identification number is a unique number assigned for tax purposes, most commonly a Social Security Number (SSN) for individuals or an Employer Identification Number (EIN) for businesses. This number is a sensitive piece of personal information directly linked to your financial and legal identity. Protecting it is important, as its exposure can lead to significant financial and administrative problems. Understanding the fraudulent activities that can result from a stolen tax ID is the first step toward safeguarding your identity.

Fraudulent Financial and Employment Activities

Filing Fraudulent Tax Returns

One of the most common misuses of a stolen tax ID is filing a fraudulent tax return. Criminals use a stolen SSN or Individual Taxpayer Identification Number (ITIN) to file a fake tax return early in the tax filing season. They invent wages and other details to generate a tax refund, which they then direct to an account they control. The legitimate taxpayer discovers this crime when they attempt to file their own return and the IRS rejects it because a return has already been processed using their SSN.

This fraud leverages the speed of the electronic filing system, allowing criminals to receive refunds before the IRS can cross-reference all income information with employer-submitted data. By the time the victim becomes aware of the issue, the fraudulent refund has often been issued. Resolving the matter with the IRS can be a lengthy process that delays the victim’s legitimate refund.

Employment-Related Fraud

A stolen SSN can be used to gain employment by an individual not authorized to work in the United States. The employer then reports the wages earned by the fraudulent employee to the IRS under the victim’s SSN. This creates a tax problem, as IRS records will indicate the victim earned more income than reported. Consequently, the victim may receive a CP2000 notice from the IRS proposing an increase in their tax liability, and they are then responsible for proving to the IRS that they did not earn the wages, which requires correcting their earnings record with the Social Security Administration.

Opening New Lines of Credit

Beyond tax-specific fraud, a tax ID number can be used by identity thieves to open new financial accounts. Combined with other stolen personal data like a name and address, a criminal can use an SSN to apply for credit cards, auto loans, and personal loans. These fraudulent accounts appear on the victim’s credit report, potentially damaging their credit score. Victims may not learn of the fraud until they are denied credit or contacted by a debt collector for an account they never opened.

Improperly Claiming Government Benefits

A stolen tax ID can also be used to fraudulently apply for various government benefits. For example, a criminal can use a victim’s SSN to file for unemployment benefits. The victim may only discover this when they receive a Form 1099-G for unemployment compensation they never received or when they attempt to apply for benefits themselves. This fraud can extend to other programs, like Social Security disability benefits, and resolving these issues requires contacting the specific state or federal agencies that administer the benefits to report the fraud.

Signs Your Tax ID Number Has Been Compromised

Recognizing the warning signs of tax ID theft is the first step toward mitigating the damage. If you attempt to e-file your tax return and it is rejected because a return with your SSN has already been filed, this is a clear signal of identity theft. Another red flag is receiving tax documents, such as a Form W-2 or 1099, from an employer you have never worked for.

You might also receive unexpected correspondence from the IRS or a state tax agency that does not seem to apply to your situation. This could include a notice that an online account has been created in your name, that you owe additional tax, or that collection actions are being taken against you. Beyond direct tax-related notices, signs of compromise can appear in your broader financial life, such as unfamiliar accounts on your credit report or notices about government benefits you did not apply for.

Information and Documents Needed to Report Theft

When you suspect tax-related identity theft, gathering the correct information and documents beforehand will streamline the reporting process. You will need to confirm your identity and provide details about the incident. Start by collecting basic personal information, including your full name, current mailing address, and date of birth.

You must provide proof of your identity, which involves having a clear, legible copy of a government-issued identification document. Accepted forms of ID include a valid driver’s license, a U.S. passport, or a Social Security card. The primary document for reporting this crime to the IRS is Form 14039, the Identity Theft Affidavit, which you can download from the IRS website. You should also gather any official notices you have received from the IRS that alerted you to the potential theft.

The Process for Reporting Tax-Related Identity Theft

After preparing your documentation, the first official action is to report the identity theft to the Federal Trade Commission (FTC) at IdentityTheft.gov. The FTC provides a personalized recovery plan and an official Identity Theft Report. This report serves as proof of the crime for other entities like credit bureaus and creditors and is an important step in the recovery process.

The next step is to formally notify the Internal Revenue Service. You will submit the completed Form 14039, Identity Theft Affidavit, along with a copy of your government-issued ID and any relevant IRS notices you received. The form provides instructions for either mailing or faxing the documents to the designated IRS address. After the IRS processes your affidavit, you should receive a letter confirming they have received it and are working to resolve the case.

The IRS will issue confirmed victims a special six-digit Identity Protection PIN (IP PIN) to use when filing future tax returns as an added layer of security. Any taxpayer can now voluntarily obtain an IP PIN through the IRS website as a proactive measure to protect themselves from tax-related identity theft.

Finally, you must take action to protect your credit. Contact the fraud departments of the three major credit bureaus: Equifax, Experian, and TransUnion. You should request that a fraud alert be placed on your credit file, which makes it more difficult for someone to open new accounts in your name. For a higher level of security, you can also request a credit freeze, which restricts access to your credit report.