Tax Return Identity Theft – Not Just a Problem at the Federal Level

Your Guide to State, Local, Federal, Estate + International Taxation

Many are aware of the big problem of identity theft relative to federal income tax filings. More and more individuals have been filing their federal income tax returns, only to find out from the IRS that someone already filed one using their information and they absconded with your refund. What many don’t know is that this is a growing problem at the state level as well.

Given that each state has its own unique tax filing rules and protocol, you’ll want to look to the taxing authority in your particular state to see how they recommend you proceed if you suspect that your identity has been stolen relative to your state income tax return. In my home state, besides being directed to take certain actions that are the similar to procedures to follow if your federal data had been stolen, taxpayers are directed to notify local law enforcement, notify the state department of revenue, and paper file your tax return. As this problem has been increasing, some states have joined a multi-state network that shares identity theft reports among participating states in an effort to reduce tax identity theft, but not all states are part of this network.

Curious about where identity theft is the worst? A 2014 Federal Trade Commission report listed Florida as number one for identity theft among the 50 states. Followed by Washington, District of Columbia (though not a state of course), Oregon, and Missouri rounding out the top five. The state with the fewest reports was South Dakota.

By Dale F. Jensen, CPA