Two headaches when identity thieves first use your identity to start your Social Security benefits, and then you having to contend with not having reported that income (you never got) to the IRS when Social Security sends the IRS and you the 1099 for that phantom income! Two bureaucracies to contend with for that single theft.
How does this happen?
This article by Mary Beth Franklin summarizes the two problems: “Tough Tax Season for Victims of Social Security Hack.” As she explains, identity thieves usually apply online for your benefits (via the online method NOT linked to your secure MyAccount), and often collect on the six months lump-sum retroactive benefits while doing so. So, a thief could apply for and start your benefits anytime after you turned 62, the lump sum option isn’t available until you go over your Full Retirement Age (FRA) (and the maximum back pay would then be 6 months). The juicy zone for identity thieves is therefore between your FRA and age 70 from those who haven’t yet applied for their benefits.
How would you know a thief has applied for your benefits?
You’d receive a letter from the Social Security Administration (SSA) saying you did (your payments were sent electronically to the bank account of the thief). Don’t think this is a reason you should rush to begin your benefits – this is a knee jerk reaction to the problem and would hurt maximizing benefits to you or your spouse as a survivor.
What should you do instead?
This is a good reason to setup your Social Security account access online so that you can periodically login and check your benefits periodically during the year. Notify your local Social Security office immediately when you see something you didn’t do – like begin your benefits.
What to do if you’re a victim?
If you are a victim of theft, you will need to go to your local Social Security office to notify them. Be sure to get a copy of anything you file with them for future reference with SSA. They’ll deactivate your online account and you won’t be able to access it either. You’ll also need to ask your local office to issue a Corrected 1099 showing you did not have that income. That Corrected 1099 is how you get the IRS off your back so you can go about correcting your income tax return (and State return too).