It’s a new year and you may already be thinking about filing your income tax return. Perhaps you have received your tax forms in the mail from the Internal Revenue Service (IRS). You may be in a hurry to file if you are expecting a refund. Before you file, we want you to understand about IRS “information returns”. These important documents are mailed to you not by the IRS, but by other organizations.
An “information return” is used to report certain income and financial transactions to the IRS. A copy must be mailed to the taxpayer. Most people are familiar with W-2 Forms, which employers use to report wages and tips of employees. However, there are many other types of income that must be reported on other IRS information returns. For example, there are over 30 variations of IRS Form 1099. You may receive a Form 1099 if you had non-wage income such as unemployment benefits, Social Security benefits, interest, dividends, pensions, death benefits, or consulting fees. (Read the IRS's Guide to Information Returns for a complete list.)
Issuers of information returns generally must mail copies to taxpayers by January 31, so you can expect to receive them in your mailbox by early February. Unfortunately, information returns are likely to contain your full Social Security number.
Until 2009, the IRS required that all information returns contain a full Social Security number. A voluntary IRS pilot project will allow businesses to truncate (shorten to 4 digits) Social Security numbers on some information returns. (Read the IRS's 2009/93 Notice on the pilot program.) In implementing the pilot program, the IRS notes: “A person’s identifying number is sensitive personal information. A risk exists that this information could be misappropriated from a payee statement and misused in various ways, such as to facilitate identity theft. In an effort to minimize this risk, this notice creates a pilot program allowing truncation of individual identifying numbers on certain paper payee statements.”
The IRS pilot project is permissive. Businesses are not required to truncate Social Security numbers. Furthermore, the pilot project does not include IRS Form W-2, the most commonly used information return.
Therefore you can expect to receive in your mail at least some information returns that will contain your full Social Security number. Your Social Security number is the key to identity theft. For this reason, an IRS information return can be an identity thief’s dream come true. In fact, some information returns may contain not only your full Social Security number, but your bank or other financial institution account number(s)—the perfect combination for identity theft.
So, what can you do to protect yourself from your IRS information returns falling into the wrong hands? Here are some suggestions:
- Use a mailbox that locks or consider having your mail sent to a Post Office Box.
- Try to retrieve your mail as soon as possible after it has been delivered. Never leave it in your mailbox overnight.
- If you go on vacation, have your mail held at the Post Office, or have a trusted neighbor retrieve it.
- If you have moved during the year, notify any payers of your new address. Do not rely on the Postal Service’s change of address service.
- If you share a mailbox with roommates, make sure that you (not your roommates) receive all mail that is addressed to you.
Paying taxes can be a chore. Don’t let it also be an opportunity for identity theft.
