A recent audit by the Treasury Inspector General for Tax Administration (TIGTA) revealed that the Internal Revenue Service (IRS) failed to notify 458,658 victims of employment-related identity theft who were identified in processing year 2017. This type of tax identity fraud occurs when a thief uses a stolen Social Security number (SSN) to gain employment.
A programming error resulted in only newly recognized victims being sent a warning—just 20 percent of those who should have received one. Anyone who had been identified as a victim in prior years were not notified.
The audit also revealed that 15,000 taxpayers who were not victims received erroneous notifications. The majority of these recipients were spouses of individuals filing honest returns, but the IRS had mistakenly flagged their files as suspect.
TIGTA made the following recommendations to the IRS to correct the issues:
- The 458,658 victims should be notified that they were victims of identity tax fraud.
- The taxpayers mistakenly sent a warning should be informed that they received the notification in error, and the identity theft markers should be removed from their tax accounts.
- The programming should be rewritten to ensure that incorrect employment identity theft markers are not mistakenly placed on taxpayer accounts in the future.
Why It Matters
Each time an individual’s Social Security number (SSN) is used by someone else to secure a job, the legitimate owner of that SSN is at risk of IRS penalties and paying taxes on earnings they never received. This version of tax identity theft can be challenging to detect. Often the only indicator is an IRS letter about taxes due on wages linked to your SSN.
What You Can Do
One method of assessing employment-related ID abuse in previous years is to check your reported earnings at SSA.gov and compare income entries to tax returns. The Social Security Administration tracks total annual wages for benefit purposes, so consider setting up an account at SSA.gov even if you are years away from retirement.