Tag: child identity theft

Posted on by Jan Roberg

Stolen Children

Imagine being a parent, raising a family, taking your kids to school, making their breakfast, tucking them into bed at night and basically doing all of the everyday kinds of things that parents do for their children.  Then you go to file your tax return and you are notified by the IRS that someone else has already claimed your children on their taxes.  How can this happen?
UPDATE:  Effective January 1, 2016 The IRS will now require Identity Theft protection PINs for dependent children who have been victims of identity theft.  Thank you!
I had always thought that cases like this were caused by divorced parents behaving badly, and to be quite honest many times that’s exactly what it is.  But after I did a post about what you should do if someone else claims your child, I started receiving numerous posts, e-mails and phone calls about how for some people, this happens to them year after year after year.
One form of recourse the IRS has is to ban a person from claiming the Earned Income Tax Credit for three to eleven years if the person fraudulently claimed a child on a tax return.  You would think that would solve the problem–except, as I’ve since discovered, it does nothing to stop true fraud.  Although the original guilty party may not be able to file an EIC claim at all–it doesn’t prevent him or her  from selling the child’s social security number on the black market to be used for fraudulent tax returns.
So who’s harmed by this fraud?  Well obviously, the parents of the children who’s identities are stolen, and the children themselves.  But also you!  According to the IRS, there is approximately $12 to $14 billion dollars of EIC Tax fraud every year.  $14 billion that’s coming out of your taxpaying pocket.
We’re talking about some serious fraud here.
In a normal case, the wrong parent claims a child, IRS notices go out, the issue is settled and the offending parent pays back the taxes while the rightful parent claim gets paid his or her refund.  While the system isn’t perfect, in theory it’s all good.
With a stolen child identity case, it’s genuine fraud.  The criminal steals the ID, creates a fake tax return–often under a fake identity, uses the child’s very real social security number to receive refundable tax credits, and then disappears off the radar before the IRS can catch him (or her.)  The IRS has to pay the real parent his tax refund–because it’s the rightful claim, but the money that went to the criminal is lost forever.
As an adult, if your identity is stolen and used in a phony tax scam, you can receive a PIN number to protect you for future tax filing.  Currently, there is no such protection for children.  And child IDs are extremely valuable to fraudsters–with a single child being worth thousands of dollars in federal refundable tax credits.
What can you do?  Please sign my petition to the Obama Administration to create a child identity theft protection PIN number for victims of child identity theft.  Basically I’m asking that anyone who has successfully defended a rightful claim for having their children on their tax return for two years in a row to be awarded a PIN number to be used in association with their child’s social security number in order to prevent fraudulent returns from being filed.
You can access the petition by clicking on this link:  White House petition  (Update, I removed the link and petition 10/10/2015, we got what we wanted.)
Why defend for two years instead of only once?  Divorced families often have conflicts over claiming a child and it’s fairly common to have an issue once in awhile.  Issuing a PIN after just one claim could wind up muddying the system worse than before.  If a family has defended the claim twice in a row– that’s a clearer indication of fraud and the need for protection is much more defined.
What happens if custody changes and the rightful parent is not the one with the PIN number?  If the parent with the PIN number doesn’t turn over the PIN along with the child’s custody, the new custodial parent will wind up paper filing their tax return and going through the same process of claiming their child as what happens currently.   The purpose of the PIN is to stop fraud, not completely end parental rights.  Please sign the petition today, and help stop child identity theft.
See also:  My Ex Claimed My Kid, Now What Do I Do?  http://robergtaxsolutions.com/2011/01/my-ex-claimed-my-kid-now-what-do-i-do/
Posted on by Jan Roberg

EIC Tax Tips – Protect Your Child’s Identity

Protect yourself from identity theft. Don't let anyone have your child's social security card.

It’s hard to believe that someone would steal a child’s identity, but it happens all the time.

 

I’ve been posting a lot of last minute tax tips for people who have excess money to donate to charity or invest in retirement plans.  Somebody asked me, “What about the rest of us?  Do you have any good tax tips for people who don’t make a lot of money?”  To be honest, I don’t have as many tips there.  If you’re income is low enough that you wind up not paying income tax, you don’t need a lot of strategies for sheltering your income.   But that said, you do want to make sure that you protect what’s coming to you and I can help with that.

 

This is the time of year when I hear the question, “My son’s father wants to claim him on his tax return but he doesn’t have custody and doesn’t pay child support.  How can I stop him?”   Usually these questions are about the Earned Income Credit (EIC.)   When you combine EIC with the child tax credits, you can potentially have over $6,000 in tax refund money.  It’s no wonder that people fight over who claims the children.  Be sure to know the rules before you file.

 

In order to qualify to claim an Earned Income Credit, your child must meet three tests:

 

Relationship:  son, daughter, stepchild foster child, brother, sister, half brother, half sister, step brother, step sister or a  descendant of any of them, and

 

Age:  the child must be younger than the person claiming EIC and under age 19 (or under age 24 if a full time student) or be any age if permanently and totally disabled at any time during the year, and

 

Residency:  the child must have lived with the taxpayer in the United States for more than half of the tax year.  If you are in the military and stationed overseas, that counts as a temporary absence and you qualify as living with your child for the time that you are on active military duty.

 

The residency requirement is the one that’s going to prevent the absentee father from being allowed to claim the child.  Now that doesn’t mean he’s not going to try—there’s between $12 and $14 billion of EIC fraud every year.   But if you are the custodial parent, you should be claiming your child on your tax return.

 

Let me say something here are relationship.  “Stepchild” means that you married the child’s biological parent.  If you are just living with someone, even if you’ve been together for 10 years, you are not legally considered to be a “stepparent”.  A “foster child” means that the court placed a child in your home.  You have legal paperwork stating that you are the “foster parent”.  It does not mean someone that you care for and care about.  (At least not for IRS purposes.)

 

So how do you make sure that no one else claims your child on your return?

 

Protect your child’s identity:   I cannot stress enough how important it is for you to protect your child’s social security number.  Especially this time of year, there is a lot of child identity theft.  Most of the time, if someone steals your child’s identity, it’s someone you know, but I once dealt with a case where a thief was stealing baby ID’s from the hospital.  The tax windfall from an Earned Income Credit (EIC) can be pretty large, and it makes people do bad things.  If an identity thief has your child’s social security number, date of birth, and the correct spelling of the name, they’ve got you.  The social security card has two out of three.  Keep it safe.

 

If someone does claim your child illegally, (you’ll know because your tax return will be rejected when you try to electronically file it) fight back.  If you are in the right, go ahead and file your tax return exactly the way you’re supposed to; claiming your child and all the tax credits you are entitled to.  You will have to mail the tax return in and it will make for a horrible delay in processing your refund.  But the identity thief will get audited, you will win your case and you will get your money.   If you are not in the right, do not waste your time.  You will be audited too.  You’ll get 11 (sometimes 22) pages worth of questions you have to answer to prove you really do have custody of your child.  If you’re legit it’s easy, if not it’s a nightmare.

 

Some people will electronically file their return to get whatever refund they can first and then file an amended claim to add their child.  If possible, file the return correctly in the first place.  It gives you a stronger case in the IRS’ eyes and it will actually be processed faster than if you do the amendment.

 

One piece of advice I saw on a message board about this was to “Go ahead and file your return before he does, even if it’s wrong so that you beat him to it.”  Although filing your return as soon as possible will help prevent someone else from claiming your child, you need to know that it is illegal for a professional to e-file tax returns without having the actual W2s.  You’d be amazed at how often the final check stub is a little different from the actual W2.  Don’t file until you have everything you need.

 

In an ideal world, you wouldn’t have to be afraid of people stealing your child’s identity for financial gain.   We’re not dealing with ideal though.  Protect yourself and your child by keeping his social security card and other personal information safe.