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)
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.
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.
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:
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:
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:
If someone is using your child’s SSN to file a tax return, you should:
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.