Did Someone Really Steal Your Tax Refund Check?
2.9 million tax returns remain suspended as of December 2022 (i.e, not processed) due to possible identity [*]. Even worse, the IRS website (as of mid-December) still stated that at least 360 days were required to resolve such identity theft cases.
On the flip side, many Americans don’t realize they’re a victim of a tax scam until it’s too late. They file taxes as usual but the IRS rejects their legitimate tax return saying that they already submitted and received a refund. But where’s the money?
Scammers commit tax identity theft by claiming taxes in your name. All they need are fragments of stolen information like your name, Social Security number, and address. This means that if someone stole your tax refund, they may have also stolen your identity.
In this guide, we’ll show you how to identify the warning signs of tax identity theft, what to do if someone steals your tax refund, and how to get your money back.
How Do Criminals Steal Your Tax Refund Check?
The easiest way for criminals to steal your tax refund check is if they have access to the physical check.
If fraudsters have access to your mailbox (or they use a change-of-address scam to reroute your mail to somewhere they have access), they can simply steal your tax refund check and cash it at any number of retailers or check-cashing stores.
They can also endorse it to themselves and deposit it into their own accounts. There are even apps that allow you to deposit checks from your phone.
But another type of tax refund theft is becoming more common: Stolen Identity Refund Fraud (SIRF).
And the consequences of SIRF for taxpayers may be much worse than losing a tax refund check.
What Is Stolen Identity Refund Fraud (SIRF)?
SIRF occurs when identity thieves use your stolen personally identifiable information (PII) to file an income tax return before you do.
Tax scammers will often use fake income information and claim bogus benefits to get the biggest return possible. And while the thief receives your fraudulent tax refund check, the IRS flags your legitimate one as a duplicate.
Unfortunately, this scam is easy for criminals to pull off. All they need to commit tax refund fraud is your name, birthday date, and Social Security number (SSN).
But, how do these tax scammers get access to your personal information?
How Do Scammers Steal Your Identity To Commit Tax Fraud?
The scary truth is that someone can steal your identity with just your ID.
Identity thieves are becoming more sophisticated in their methods to steal taxpayer data and PII by:
Mining for PII exposed during recent data breaches
Banks, credit bureaus, and major tax preparation sites (like TurboTax) are hot targets for cybercriminals. These data breaches expose your personal information that scammers can use to commit identity theft and steal your tax refund.
The number of data breaches increased 68% from 2020 to 2021 [*], meaning there’s a good chance your personal data has been exposed.
Buying PII on the Dark Web
Did you know that criminals can pay as little as $5 for stolen Social Security numbers on the Dark Web? And that’s not all. They can also find account passwords, debit and credit card account numbers, birthdates, and more.
Social engineering attacks (like phishing)
Many IRS scams begin when victims receive a phone call from an “IRS representative” or an email that appears to come from the IRS. In these "phishing" attacks, victims are asked to verify their information in order to process their tax refund. Then they give out everything fraudsters need to steal their tax refund check.
Remember, the IRS will never contact you by phone or email.
Phishing attempts don’t just come from IRS dupes. You may receive phishing emails (that look identical to real ones) from your bank, employer, or even on social media.
Tricking you into installing spyware and malware
If you accidentally click a link in a spam email or suspicious message, you may have accidentally downloaded malicious software to record all your keystrokes. Your usernames, passwords, PINs, account numbers, and more will then be handed over to fraudsters. So how will you know if you’re a victim of stolen identity refund fraud?
7 Signs You May Be a Victim of Tax-Related Identity Theft
According to the IRS, the most common red flags of identity theft for taxpayers are:
- You get a letter from the IRS asking about a suspicious tax return you did not file.
- You can’t e-file your tax return because someone has already filed one using your Social Security number or individual taxpayer identification number (ITIN).
- You receive a tax transcript in the mail that you did not request.
- You get an IRS notice about an online account that was created in your name.
- You receive an IRS notice that your existing online account has been accessed or disabled though you took no action.
- IRS records show you received wages or other income from an employer you never worked for.
- You were assigned an Employer Identification Number (EIN), but you did not request one.
Identity theft goes beyond just tax fraud. You should also be on the lookout for any of the common warning signs of identity theft. This includes unfamiliar credit card purchases, new accounts in your name, or missing mail.
If you receive any of these IRS notices, it’s time to get the ball rolling on your recovery process.
Tax Refund Check Stolen? Follow This 4-Step Checklist
- Check your official tax refund status.
- Request a refund trace.
- Report your stolen identity.
- Safeguard your identity moving forward.
1. Use the “Where’s My Refund Status Checker” on IRS.gov
You can check the status of your tax refund 24 hours after the IRS receives your e-filed return, or about four weeks after mailing your paper return.
To do this, go to the Get Refund Status portal on the IRS.gov website.
You’ll be asked to provide personal information such as your Social Security number to see the status of your return. For added precaution, avoid going through this process on a shared device or over public Wi-Fi that can be hacked.
Don’t want to fill in your personal information online? You can also complete this process on the IRS2Go mobile app. Or, contact an IRS representative at their toll-free phone number (800-829-1954).
The refund checker will show the status of your refund as either: Received, Adjusted, or Completed.
Received and Adjusted mean you’ll need to wait a bit longer for your refund, as the IRS isn’t done reviewing or processing it yet. The status checker usually updates once every 24 hours (typically overnight).
If you see a Completed status, however, you can check to see how your refund is being delivered.
- Paper checks should arrive within six weeks of your return being accepted.
- Direct deposit refunds generally hit your account within 21 days of the IRS accepting your return.
What can you do with this information?
If you haven’t filed a tax return and your account shows any of these statuses, you know your identity has been stolen.
If you have filed a return and haven’t received a notice from the IRS about potential fraud, you should wait up to five days after these timeframes before suspecting a lost or stolen tax refund.
If you still don’t have your refund and noticed signs of identity theft, you can ask the IRS to track down your refund check or find out which financial institution your direct deposit went to.
2. Request a refund trace from the IRS
If your tax refund check is missing, you can ask the IRS to trace who cashed it.
Here’s how to go through this process depending on your status:
- Single, head of household, or married filing separately. Call the IRS Refund Hotline (800-829-1954) or begin a refund trace using the prompts on the Where’s My Refund? portal on IRS.gov (or the IRS2Go mobile app).
- Married filing jointly. You can’t use the automatic refund trace. You’ll need to complete IRS Form 3911 (Taxpayer Statement Regarding Refund), then mail it to the IRS like you would normally file a paper tax return.
This will show the IRS that you didn’t request the refund or it was stolen. But what about getting a new tax refund check?
If you opted for a paper check refund and it has not been cashed: the IRS will cancel the original check and issue you a replacement tax refund check. You should receive your replacement within six to eight weeks.
If your check has been cashed: the Bureau of the Fiscal Service (BFS) will provide you with a claim package that includes a copy of the cashed check. You’ll need to follow the instructions to complete a claim package.
If your tax refund was supposed to be deposited directly into your bank account: the BFS will send your financial institution a letter within six weeks. Then they’ll try to verify where the deposit went.
You can also request a copy of the fraudulent return. The IRS will acknowledge your request within 30 days of receipt, and you’ll receive a copy of the return within 90 days. Just be aware that some information on the return may be masked/redacted.
Zoom out: The IRS will eventually distribute your tax refund check if it’s stolen. But the investigation process averages 278 days. If this delay is causing financial hardship, contact the Taxpayer Advocate Service. They’re an independent organization within the IRS that protects taxpayers’ rights.
3. Report your stolen identity to the IRS, FTC, police, and your bank
If you learn you’re a victim of identity theft, you should report the situation to The Federal Trade Commission (FTC) at IdentityTheft.gov.
Their online wizard will walk you through the ID theft reporting process. When you’re done, you’ll have a free recovery plan as well as documentation including your:
- FTC Identity Theft Report. You’ll use this official report to alert financial institutions and businesses that someone stole your identity. This makes it easier to dispute fraudulent charges, unauthorized account activity, and other problems.
- IRS Form 14039 (Identity Theft Affidavit). This tells the IRS that your SSN has been compromised and someone used it to file a fraudulent tax return.
File a police report (maybe). You may need to file a report with local law enforcement if your identity has been stolen. Learn how to file a police report for identity theft (and when you should).
Check your accounts and credit report for suspicious activity. Look for signs of financial fraud like new accounts or loans you didn’t apply for.
You’re entitled to one free credit report annually. This covers activity monitored by all three credit bureaus (Experian, Equifax, and TransUnion).
You may also want to consider:
- Placing a fraud alert on your credit report. This instructs businesses and creditors to take extra steps to verify your identity before approving any new lines of credit or major purchases.
- Freezing your credit. A credit freeze prevents creditors, businesses, etc., from accessing your credit report. Then fraudsters can’t open new accounts with your stolen PII.
These are just a few ways to assess the damage a stolen identity may inflict on your reputation and credit score. They’ll also stave off further harm.
4. Safeguard your identity moving forward
It can be a long, arduous, and frustrating process to recover from someone stealing your tax refund check. And the last thing you'll want to do is go through it a second time.
Here are a few final precautions you can take to prevent this situation (or worse) from happening again:
Get an IRS Identity Protection PIN. This 6-digit ID PIN offers additional protections when it comes to your tax return. Fraudsters will not be able to file tax returns without this extra layer of security. Your IP PIN changes every year, too.
Sign up for Aura’s credit monitoring and identity theft protection. Aura monitors your online accounts, banking information, and credit score for signs of fraud. We’ll also tell you if your SSN and other sensitive information have been exposed on the Dark Web and protect your devices and Wi-Fi from viruses, malware, and phishing.
And if the worst happens, you’re covered by a $1,000,000 insurance policy for eligible losses due to identity theft.
The Bottom Line: Protect Your Tax Refund and Your Identity
If you follow these tips, you’ll hopefully never have to worry about becoming a victim of tax refund scams next filing season.
But here's one final tip: File your taxes early. Most taxpayers receive their W-2 forms near the end of January. If you file your taxes early and anyone tries to file a fraudulent tax return with your Social Security number, the IRS will reject their claim — not yours.