5 Ways an Identity Thief Can Use Your Social Security Number

Man's hand holding Social Security card. Computer theft on laptop.

Having your Social Security number or card stolen isn’t quite like getting your bank account information taken—though granted, both are stressful experiences. The major difference is that you can get a new bank account number, while the Social Security Administration very rarely issues new Social Security numbers.

Why You Need a Social Security Number

If you’re unsure what an SSN is, the Social Security Administration loosely defines it as a nine-digit number for identity-tracking purposes. Whenever you start a new job or apply for government benefits, you need your Social Security number: it will be used to verify your identity and record earnings. You can locate your Social Security number on your Social Security card—if you can’t find your card, make sure you reach out to the Social Security Administration directly.

How Social Security Number Theft Occurs

How someone finds out and steals your identity (or Social Security number) can happen in a variety of ways. They could gain your Social Security number by exploiting data breaches, sifting through the trash for personal documents, or using any number of other approaches. The thieves can then sell your identity to the highest bidder on the dark web.

What Happens When Someone’s Identity Is Stolen

Once an identity thief has your Social Security number, they can commit all sorts of financial fraud with it, potentially leaving you on the hook for their misconduct.

Look at it this way: Social Security numbers are wrapped up in most aspects of Americans’ lives—employment, medical history, taxes, education, bank accounts, and so on. Below is a list of just a few things someone can do with your SSN if they get their hands on it.

1. Open Financial Accounts

Your Social Security number is the most important piece of personal information a bank needs when extending you credit or opening an account. With that number, a thief can get credit cards or loans, and when it comes time to repay them, they won’t, damaging your credit in the process. Those missed payments are tied to your Social Security number, so they’ll end up on your credit report and could impact your ability to apply for any type of loan or new account in the future.

Once you spot suspicious transactions, you can use your credit scores and credit reports to detect fraud and put an end to it. Unfortunately, it could take years for the fraudulent information to be removed from your credit report and, as a result, for your credit scores to recover.

2. Get Medical Care

Someone using your Social Security number could also undergo medical treatment, effectively tainting your medical records. Inaccurate medical records can have deadly consequences—for example, imagine what could happen if you received treatment based on a false history listing the wrong blood type. Additionally, it’s possible for thieves to poach your health insurance coverage, which could leave you in a bind when you need it.

3. File a Fraudulent Tax Refund

Taxpayer identity theft is a growing problem. Identity thieves use stolen Social Security numbers to get a fraudulent refund, which then delays any refund the victim is rightfully owed. In 2016, the IRS identified $227 million lost in fraudulent tax returns, and this issue is bound to become even more problematic in the wake of massive data breaches like the 2017 Equifax hack.

So the sooner you file your taxes, the more likely you’ll get your refund before an identity thief has an opportunity to take advantage of your stolen identity. You’ll know someone stole your identity if your return is rejected as a duplicate—then you get to start the process of resolving the fraud and, if necessary, getting the refund you deserve.

4. Commit Crimes

Getting your Social Security number might just be a fraction of the thief’s crimes. If the identity thief gets arrested for another crime and gives your Social Security number to law enforcement, you’ve become tangled in their criminal history. Their criminal record could prevent you from getting jobs or interfere with anything else that requires a criminal background check.

5. Steal Your Benefits

A thief could also use your Social Security number to file for unemployment or Social Security benefits, depleting those resources and preventing you from accessing that assistance when you need it later on.

How to Find Out If Your Social Security Number Has Been Stolen

Thieves can operate under your identity for years without discovery, and some of these crimes are very difficult to detect. One of the best things you can do is regularly check a free credit report. Review your credit report thoroughly for unauthorized accounts or public records not related to you. These red flags could indicate clerical errors or identity theft. Either way, you want to watch out for it and act as soon as you see something suspicious. You can also check out these other ways you can find out if you’re a victim of identity theft. 

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Why the IRS Should Push Tax Day to June 15

The only way to stop tax refund fraud is to change the way the tax filing and refund system works, and while this may be a painful process for employers and taxpayers alike, it’s necessary.

 The Problem With Data

Unless you’ve been hiding out in the Unabomber Suite at the Loon Lake Lodge, you know that data-related crimes are legion, but what you may not know is that data-related tax fraud specifically is increasing geometrically. It is a problem screaming out for a solution.

The mother of these crimes is the by now all-too-familiar data breach — what  I like to call the third certainty in life. We know for sure that way more than a billion records are “out there” as a result of data breaches. That’s a ginormous amount of information, and it can be used to commit a panoply of crimes — one of the more lucrative among them being tax refund fraud.

Tax refund fraud losses are estimated to reach $21 billion by this year, according to the Treasury Inspector General for Tax Administration, which provides independent oversight of the Internal Revenue Service. It is an astounding figure, greater than the gross domestic product of many small nations.

The fact that you have not yet become the victim of taxpayer identity theft may have more to do with dumb luck than your efforts to stay safe. For while there are mountains of records out there, there are only so many criminals available to use them for this or that identity-related crime. It may not be tax fraud, but at some point the bad guys are going to get you. (If you do have reason to believe your personal information was compromised, you should monitor your credit for signs of other identity theft. You can do so by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com.)

The Problem With April 15

In 2012, the IRS received more than 148 million tax returns. The agency issued almost $310 billion in refunds to approximately 110.5 million taxpayers. That is a whole lot to keep track of, a fact that is not lost on identity thieves. According to a report from the Government Accountability Office, by March 1 of 2012, the IRS had already paid out around half of that year’s tax refunds. That is a month and a half before the April 15 filing deadline.

If you were a criminal, you would see that timeline as an irresistible opportunity.

As December fades into January, and you start preparing your taxes, employers also get to work on filing your W-2 with the government. The feds then compare your tax return to the W-2 your employer files to make sure everything matches up. But here’s the catch: Employers don’t have to file W-2 wage data until March 2, if they file on paper, and March 31 for e-filers.

And that’s the perplexing part: Half of the refunds in 2012 were sent out on blind faith. As things stand now, the IRS only starts the process of matching employer-reported W-2 data to tax returns in July, long after most refunds have been issued. It’s called “look-back” compliance.

Does that sound a tad crazy to you? If you answered in the affirmative, you might just be sane (at least with regard to this issue). While justice is blind and we like it that way, that’s the only part of government where lack of vision is a virtue, and it’s high time the IRS should consider getting new glasses.

To be fair, part of the reason for the slow compliance check is that W-2s have to go through the Social Security Administration before being sent over to the IRS. Why it’s done this way is anyone’s guess, but it doesn’t matter. Until it is changed, tax refund fraud is only going to get worse and worse and worse, which is the fundamental problem with April 15, March 2 and March 31, both reflexively and respectively.

Given that problem set, a simple (and necessary) change applied to the flow of information is not going to solve the problem by itself. The IRS uses look-back compliance for an important reason: to get money back to taxpayers as soon as possible. Many taxpayers rely on refunds to make ends meet, and as a result the IRS is under enormous congressional pressure to issue refunds promptly. In fact, the agency is required by law to pay interest if it takes longer than 45 days after the tax return’s due date (typically April 15) to issue a refund.

It is by dint of this system that most taxpayers can expect a refund within 21 days of filing their tax return, and that is an excellent thing. Unfortunately, for those who become victims of tax-related fraud and refund diversion, it may take more than 300 days to actually get their money back.

Why We Must Eliminate Look-Back Compliance

That said, the refund process is a quaint relic of simpler times. It’s the epitome of an analog approach devoured in our digital reality, and because of this, look-back compliance should go the way of the mainframe computer.

There is no simple solution that can make this happen overnight. The GAO’s suggestion of earlier W-2 filing deadlines might allow the IRS to match employer-reported wage information to taxpayers’ returns before issuing refunds. The recommendation in the report was to move up the employers’ deadline from March 31 to January 31. This could be facilitated by requiring all employers to e-file W-2s, instead of the current arrangement, in which only companies with more than 250 employees have to e-file. Paper filing costs more, and it takes longer, which exacerbates the problem. It was probably time to institute mandatory W-2 e-filing a decade ago, but better late than never.

Of course, these issues are for those “guardians” in Congress to figure out, but one thing is certain — something has to change.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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