As the name suggests, identity theft is the swiping of your identity for dubious purposes. If it happens to you, it is more or less a nightmare. The biggest worry for most people is credit accounts being opened and abused by the thief in question. This results in your credit being destroyed, which means good luck in buying a house and so on.



There are other ways identity theft can be a problem. Identity theft can really hurt you with the IRS. There are a couple of ways this can happen, so let's take a closer look.

First, you identity can be used to create fake identities for others. It sounds like something out of a spy novel, but there is a more practical application these days. Illegal immigrants are facing new regulations in some states where they must produce proof of citizenship to receive medical service, a job and so on. Guess where they are getting it? Yes, your personal financial information is being sold to them, specifically your social security number.

So, how does this cause you problems with the IRS? This is where the second problem arises. Your social security number is also the number used by the IRS to track your earnings. If someone else is using it to get a job, the IRS is going to think you earned far more money than you are reporting on your return. Nothing aggravates the IRS more. You can expect a huge audit and pure misery until the situation is worked out.

If this nightmare scenario happens to you, are you sunk? Nope. The IRS is keenly aware of the problems with identity theft. This is particularly true since scam artists are sending out fake IRS emails to try to snare unwary individuals. If you are a victim of identity theft and start getting notice from the IRS, there is one step you need to take. You must immediately contact the IRS. If you procrastinate, the IRS is not going to be particularly sympathetic. Act now.

Once you act, the IRS will take a closer look at the earnings. They may interview the employer, but will definitely look at the location of the business. If you are in Los Angeles and the employer is in Boston, the IRS is going to let you off the hook.

Identity theft is a nightmare, so be careful out there. If you run into a problem that gets the attention of the IRS, communicate immediately with them to avoid bigger problems.