Tax return and other tax-related identity theft has become an increasing problem for the Internal Revenue Service and taxpayers.
Some tax thieves will improperly obtain a taxpayer’s name and social security number and use this information to fraudulently file a false income tax return, claiming refunds and credits. The tax thief normally files early in the tax-filing season to prevent the IRS from matching the items listed on the false tax return to the real taxpayer’s Forms W-2 or 1099. The taxpayer will learn of the existence of a problem after the legitimate tax return is filed. If electronic filing is attempted, the IRS will reject the filing due to the previously filed return. If the taxpayer files a paper return, IRS will issue a notice disclosing the existence of a prior filed return.
Some tax thieves will use your tax information in a different manner. They may gain employment under your name and social security number and claim sufficient exemptions so there is little to no income tax withholding. The corresponding Form W-2 is posted to your account by the IRS, and the thieves ultimately receive the funds tax-free. You will eventually get a correspondence audit notice from the IRS that there is income not reported on your tax return.
If you are the victim of a tax identity theft, you need to know the specific steps which must be taken involving the IRS, the Federal Trade Commission, the major credit bureaus and local law enforcement to protect your rights.
Internal Revenue Service: If your social security number has been compromised, respond immediately to any written notice from the IRS. A written notice will provide contact information including a number to call. Alternately, you can go to a local IRS office with the notice and speak to an IRS representative in person.
The IRS does not initiate contact with taxpayers about tax records by telephone or through e-mail, text or social media messaging. If you receive these types of initial contacts from the IRS, they are most likely scams and attempts to get personal information from you. These contacts will frequently advise that the taxpayer is under investigation and threaten serious consequences for failure to contact the caller. The IRS requests that such suspicious calls be reported to the agency by calling (800) 829-1040 or that e-mails be forwarded to email@example.com.
Once you have contacted the IRS, complete IRS Form 14039 Theft Affidavit. This form can be used even if you have discovered the existence of a non-tax identity theft situation. Section A, question 2 informs the IRS of a problem involving non-federal tax identity theft and your concern that your federal tax records could be affected in the future. This form, with the additional requested identification, can be mailed or faxed to the IRS.
The Internal Revenue Service has created an Identity Protection Specialized Unit to specifically handle matters of tax-related identity theft. This Unit can be contacted at (800) 908-4490. You will be connected with an agent who will assist in handling your case.
The IRS will generally issue an identity protection PIN number to identity you as the proper person connected to your social security number for filing an income tax return for the year of theft. A new IP PIN is issued every subsequent year if a theft indicator remains on your account.
The National Taxpayer Advocate has indicated that taxpayers must expect delays in dealing with the IRS. Due to staffing issues, the IRS Identity Protection Specialized Unit has had problems attending to all the cases of identity theft. It is important to stay on top of things, particularly if you do not receive call backs within a reasonable period.
Federal Trade Commission: File a complaint and Identity Theft Affidavit with the Federal Trade Commission at www.identitytheft.gov or call the FTC Identity Theft Hotline at (877) 438-4338. Local law enforcement will generally want a copy of this Affidavit.
Credit Bureaus: Contact the three major credit companies to place a fraud alert or credit freeze on your credit records at
- Equifax: www.Equifax.com or (800) 525-6285
- Experian: www.Experian.com or (888) 397-3742
- TransUnion: www.TransUnion.com or (800) 680-7289
A “fraud alert” tells the credit bureau that you are the victim of identity theft and requires that a business verify your identity before issuing credit in your name. A fraud alert is generally free and is good for ninety days. It can be reviewed after that. A “credit freeze” makes it more difficult for a new account to be opened in your name since potential creditors cannot get your credit report without your express authorization. This makes it more unlikely that thieves can open new accounts in your name. You need to check with the Attorney General’s office in your state to determine if there are any costs to place or lift a credit freeze. Additionally, state law determines how long a credit freeze will last.
If you want to place a fraud alert on your account, you need to contact only one of the credit companies and inform it that you are the victim of identity theft. It will contact the other two credit companies. However, if you want to place a credit freeze on your account, you must contact all three credit companies.
You should also request copies of your credit reports to ensure that there are no improper charges on your accounts. There reports should be monitored periodically.
Local Law Enforcement: File an Identity Theft Report with your local law enforcement. Most local police departments will request a copy of the FTC Identity Theft Affidavit as an attachment to their reports. The Local Identity Theft Report, along with the FTC report, can be helpful if there have been improper charges placed on your credit cards.
If you discover that you have been the victim of tax-related identity theft, please contact your Marcum Tax Advisor who can assist you through this process.