During tax season, everyone should be on the lookout for tax scams and rebate fraud. The Internal Revenue Service (IRS) monitors returns for fraudulent activity to combat tax identity fraud and offers tips for tax-filers.
While anyone can be a victim of tax fraud, children can be particularly vulnerable. More than half of identity theft and fraud cases in 2021 involved children aged nine or younger, with an estimated 1.25 million children having their identity stolen. The financial impact can be devastating, causing losses of $1 billion annually to the affected families. The expansion of the child tax credit in 2021 created additional opportunities for potential fraud, which led to the IRS warning parents to beware of scams.
Many times, identity thieves target children because the compromise can go undetected for years, and the effects of child identity theft can be long-lasting as well. The resolution process can drag out for years, and 25% of victims are still dealing with issues as many as 10 years after the fraud first occurred. Of those victims, 81% remain worried today about their ability to obtain credit in the future. (Payments Journal)
How the Child Tax Credit Scam Works
With child tax credit scams, identity criminals pretend to work for the IRS and offer help to get the monthly child tax credit payments sooner in exchange for money. They require you to send a gift card, complete a wire transfer or send cryptocurrency as a form of payment so that you can receive monthly payments.
Parents and guardians should be on the lookout for phone calls, emails, text messages and messages on social media asking to verify your information to receive the child tax credit payments or under threat of punishment. The IRS does not initiate contact with taxpayers by these means — relying instead on the postal service. Also, the IRS does not leave messages threatening to revoke your driver’s license or immigration status, arrest you, or send the police to obtain information.
Any contact you get that includes such messaging should be considered a scam.
Steps to Take if Your Child is the Victim of a Child Tax Credit Scam
- Report the scam to the Federal Trade Commission (FTC) by either using their complaint assistance tool, calling 877-382-4357, or visiting their website www.identitytheft.gov.
- If you get an email claiming to be from the IRS, ignore it. Forward it to the IRS at firstname.lastname@example.org.
- Report any phone scams via the IRS Impersonation Scam Reporting Form.
Other Child Identity Tax Fraud Issues
There is at least one other child identity tax issue of which parents should be aware. Someone else may claim your child as a dependent. The IRS has additional information on what to do if someone fraudulently claims your dependent.
How to Tell if Your Child’s Identity Was Compromised
Many people do not know that they are victims of tax identity theft until they file their tax returns and have them rejected by the IRS. The IRS says any of the following could be a warning sign of tax identity theft:
- More than one tax return was filed using your Social Security number (SSN)
- You received payment from an unfamiliar employer
- You owe additional tax or had an unexplained refund offset
Since your child is listed as a dependent, you would be notified that someone else claimed them as a dependent or filed a return using their SSN. Other signs that your child’s identity could have been compromised include:
- You get a letter from the IRS that says your child didn’t pay income taxes that are owed.
- Your child begins to receive suspicious mail, like pre-approved credit cards and other financial offers usually sent to adults in their name.
- You try to open a financial account for them but find one already exists, or the application is denied because of poor credit history.
- You apply for financial aid for college and you discover your child’s SSN is associated with someone’s work history.
- A credit report already exists in their name. If the child has one, they may have already been targeted since only an application for credit, a credit account, or a public record starts the compilation of a consumer credit file.
What to Do if Your Child’s Identity Was Compromised
When someone else claims your child on their taxes, the simplest solution is filing your taxes and listing your child. The IRS will open an investigation. The IRS lists the following steps:
- File your taxes by mail, as electronic filings may cause a rejection of your return due to duplicate dependent claims.
- Provide proof that you’re entitled to claim the child as a dependent.
- Answer the IRS when they contact you regarding the investigation.
If someone is using your child’s SSN to file a tax return, you should:
- Contact the IRS immediately. If you receive a notice, respond quickly. You can also contact the IRS at 800-908-4490 so they can take steps to secure your child’s tax account and SSN.
- Complete and submit an IRS Identity Theft Affidavit. IRS Form 14039, Identity Theft Affidavit, is a fillable form on the IRS website and should be filled out.
- Freeze your child’s credit. Contact the three major credit reporting agencies (Equifax, Experian, TransUnion) to freeze your child’s credit and reduce the chances a threat actor can open new accounts that require a credit check.
- Check with your state tax authority. Cybercriminals often use stolen identities to apply for state benefits. Check to see if someone has filed for a state tax refund in your child’s name if you learn someone is using their information to file a federal tax return.
Contact the ITRC
If you have additional questions about child identity theft or tax scams, contact the Identity Theft Resource Center. You can speak with an advisor toll-free by phone (888-400-5530) or live-chat on the company website. You can also find the latest resources (fact sheets, scam alerts, blogs, etc.) on identity theft, cybercrime and more. Just visit www.idtheftcenter.org to get started.
Sontiq is a proud supporter of the Identity Theft Resource Center nonprofit.