What the IRS Should Do Now to Protect Taxpayers From Fraud
The recent data breach at Equifax is just the latest reminder of the threat that identity theft poses. Although most people are aware of the possibility of having their credit cards used fraudulently, many overlook the threat of return-related tax fraud. The IRS has a weapon at its disposal that could dramatically reduce the risk of identity theft crimes related to taxes, but thus far, the taxing agency has only made that weapon available to a small fraction of taxpayers. Recent events should prompt taxpayers to demand that the IRS release this key tool to everyone.
To take advantage of your personal information, identity thieves can file fraudulent tax returns with the IRS in order to collect incorrect tax refunds. When you later file your own actual return, the IRS will flag it as the second return it has received linked to your Social Security number. That will not only leave you fighting to get any tax refund that you might rightfully deserve, but will also force you to do some explaining to the IRS.
The problem with the current system is that all someone needs in order to file a tax return is your name and Social Security number. Thieves can provide false addresses and bank account information in order to funnel refunds into their possession. The IRS doesn't require any identity validation in connection with returns, and that leaves the door open to tax return fraud.
Source: Fool.com