With tax season winding down, 2013 could yield a record numbers of tax returns delayed because of tax identity theft.
Bill Nemeth, an enrolled agent at Tax Audit Guardian in Atlanta, says more and more of his clients are becoming victims of the crime.
"A few years ago we would get a little of it. Now we watch for it. It's out of control, it truly is," Nemeth said.
As an enrolled agent, Nemeth is licensed to help people who are in trouble with the Internal Revenue Service.
His clients sign over to him power of attorney, which means all copies of correspondences from the IRS are sent to Nemeth's office.
"I started getting letters on some of them on taxes that I knew they hadn't filed." said Nemeth
If he wasn't given power of attorney, his clients would never have known about the false refund until their own refund was rejected by the IRS.
Nemeth said one way you can warn yourself from tax refund fraud is to fill out an 8821 Tax Information Authorization Form. He said you can fill out the form for yourself and for your children.
You need to check Box 5: Disclosure of Information.
If you check this box, all copies of IRS correspondences will be sent to your address.
The form will not stop a fraudster from filing a false claim, but if for any reason the IRS finds a problem with the fraudster's return, they will send a notice to the fake address on the tax form and a copy of that letter will also be sent to your home address.
The copies sent to you will unfortunately not contain the fake address on it.
For example, if you were to receive a notice from the IRS that something was wrong with your 10-year-old daughter's 1040 form, that would be a red flag.
You could fill out an Identity Theft Affidavit and put a freeze on your daughter's credit.
Nemeth said the 8821 form would also work for family members that have passed away. He says a lot of tax fraud involves the use of Social Security numbers that were stolen from death certificates.
If you are the executor of someone's estate, you can fill out an 8821 form for the person who has died.
Mark Green of the IRS isn't sure about how effective filling out a 8821 form will be and wants to emphasize that filling out the form will not prevent identity theft.
He said the IRS is committed to prevention of identity theft and have dramatically enhanced their systems to combat tax fraud.
Clark and Green both agree that the best way to protect your tax refund is to reduce your withholding.
If you expect a big tax refund this year, go ahead and reduce your withholding from your employer so that you don't have a refund you're anticipating next year.
If your identity is stolen, it's the best protection so that you don't sit for a year or more waiting for your own money back.
The IRS web site offers a withholding calculator taxpayers can use to figure the correct amount of federal withholding.