On July 17th, 2013, the Treasury Inspector General for Tax Administration (TIGTA) released its audit report on the IRS’s Taxpayer Protection Program (TPP). The IRS implemented the TPP in order to proactively identify potential identity theft issues. The TIGTA report was generally favorable, finding that the TPP has improved identity theft detection.
IRS management has agreed to all four recommendations within the audit report, as follows:
- Develop a process to ensure that required identity theft indicators are placed on taxpayer accounts,
- Develop a process to ensure that IRS employees are properly updating taxpayer accounts when working on cases, including closing the case,
- Develop a timeliness measure to track the time frame to resolve TPP cases,
- Ensure that IRS employees complete required training.
The TPP identifies two types of identity theft – Refund Fraud (fraudulently filed tax returns) and Employment Related Fraud (misreported income). In both types, once the IRS has determined that a tax return is questionable, a letter is mailed to the individual at the address reflected on the return. The letter asks the taxpayer to verify that a return was filed. In 2012, 89 percent of the letters mailed were returned undeliverable or not responded to, and none of these returns were processed.
If a taxpayer becomes aware that he or she is a victim of identity theft, Form 14039 Identity Theft Affidavit should be filed. This can and should be filed whether there is a tax related issue or not. This allows the IRS to flag the account for future filings, and requires photocopied documentation (Passport, Driver’s license or Social Security Card) to verify identity.
When the TPP flags a taxpayer’s account, a letter is mailed to them, along with a unique Identity Theft Personal Identification Number (IP PIN). The IP PIN will be required to file the tax return. Any tax return filed with the taxpayer’s account will be reviewed to ensure it is being filed by the verified individual.
As a reminder – the IRS does not initiate contact with taxpayers by email, fax or any social media tool. If you receive such correspondence, either ignore it or pass it on to the IRS. You should NEVER respond.
If you have any questions or concerns about identity theft, please contact your Marcum Tax Professional.