With the April 15 federal tax deadline looming, your child may be more vulnerable to identity theft. In 2018, researchers saw an increase in the sale of children’s Personally Identifiable Information (PII) on the dark web, which can be used by criminals to claim dependents on fraudulent tax forms.
Fake Dependents Can Be Profitable for Identity Thieves
What’s the upside for a criminal claiming your dependent as their own? Dark web analysts found that potential identity thieves could purchase an infant’s name, Social Security number, date of birth, and mother’s maiden name for around $312. This is compared to the $1,000 a thief could gain by claiming a dependent on a fraudulent tax return.
Many tax refunds are issued by the IRS well before the tax form is fully scrutinized, which may give identity thieves enough time to cash in on your dependent tax credit—and run.
Why You May Want to Consider Filing Your Tax Return Early
When a criminal uses stolen information to claim a dependent on a fraudulent tax return, it may go undetected until the child’s real parents file a legitimate return.
The IRS uses a computer system to screen for Social Security numbers that appear on more than one return. If a second tax return is filed using the Social Security number for a dependent that’s already been claimed (or for someone claimed as a dependent who also claimed a personal exemption), the second filer will likely get an e-filing error message.
If a thief claims false deductions in your name or causes other problems with your tax return, it could take months to rectify the issue. The Internal Revenue Service (IRS) is now accepting 2018 tax returns, and, as in previous years, the agency recommends filing as early as possible to help prevent crooks from cashing in on your refund before you do.
Dependents and Shared Custody
Sometimes blended families unintentionally claim the same child as a dependent. According to the IRS, an individual may be a dependent of only one taxpayer for a tax year, even if child custody is shared. The IRS provides tie breaker rules in the form of an online tool to help taxpayers determine who can claim a dependent.
What to Do if You Suspect Someone Has Falsely Claimed Your Dependent
If you receive an e-filing error based on a dependent dispute, H&R Block provides recommendations on how to resolve it. The IRS also provides a fact sheet for taxpayers who suspect they might be victims of tax identity theft.