Tax-Related Identity Theft

Identity theft is the fastest growing crime in America, with the number of identity theft incidents nearing 10 million a year. And in most cases, you won't know you are a victim of tax-related identity theft until you file your tax return.

How And When To Report Tax-Related Identity Theft
There are usually two ways a taxpayer becomes aware he or she is a victim of tax-related identity theft:

• The IRS rejects your tax return because someone has already filed a return using your name and social security number. 
• You receive correspondence directly from the IRS that informs you, before filing, that someone has filed a suspicious return under your name and social security number.

In either case, you will need to file a paper return by mail and file IRS Form 14039, Identity Theft Affidavit to ensure that the IRS flags your tax account for review of any suspicious activity. You can fax, mail or submit the ID Theft Affidavit with your paper tax return.

Filing the ID Theft Affidavit notifies the IRS that someone else has already filed a return using your SSN or you have been informed of a suspicious return filed or you know your information has been compromised due to a lost or stolen wallet or for some other reason. This notification allows the IRS to take steps to secure your account.

Most cases are resolved within 120 days but can take up to 180 days. Certain tax-related identity theft victims will be placed into the Identity Protection PIN program to add an extra layer of identity protection. Taxpayers who are victims of identity theft will receive a letter (CP01A) with an Identity Protection Personal Identification Number (IP PIN) prior to the start of next filing season to help protect their tax returns going forward.

And if your refund is delayed due to ID theft and it’s causing a financial hardship such as an imminent eviction, utility cutoff, inability to pay for medical needs, tuition, etc., you should contact the Taxpayer Advocate Service..

Additional Steps
​If you are a victim of identity theft, the Federal Trade Commission (FTC) recommends these steps:

• File a report with the Federal Trade Commission Identity Theft.Gov
• Contact the three major credit bureaus to place a fraud alert on your credit records: 
• Equifax Fraud Alert 
• Experian Fraud Alert 
• Transunion Fraud Alert 
• Contact your financial institutions, and close any financial or credit accounts opened without your permission or tampered with by identity thieves.

If you’ve created an Identity Theft Report with the FTC, you can get an extended fraud alert on your credit file. When you place an extended alert, you can get 2 free credit reports within 12 months from each of the 3 nationwide credit reporting companies, and the credit reporting companies must take your name off marketing lists for prescreened credit offers for 5 years, unless you ask them to put your name back on the list. The extended alert lasts for 7 years.

IRS ID Verification Service
A pre-screening procedure has been implemented for suspicious tax returns. But since the return could be legitimate, the IRS has provided opportunity to verify identity. When the IRS receives a suspicious return, Letter 5071C will be mailed, asking for verification of identity. The letter provides two options for responding. Either by calling the toll-free number listed on the letter or by visiting idverify.irs.gov within 30 days. Whichever option you use, have available a copy of your prior year tax return and your current year tax return, if you filed one, including supporting documents.
If the taxpayer fails to respond to the verification request or responds and answers a question incorrectly the IRS will flag the return as fraudulent and follow the prescribed procedures for resolving identity theft cases. 

If identity is verified, the taxpayer can then confirm whether or not they filed the return in question. If they did not file the return, the IRS can take steps at that time to assist them. If they did file the return, it will take approximately six to nine weeks to process it and issue a refund.

Reduce Risk

• Always use security software with firewall and anti-virus protections. Use strong passwords.
• Don't send identity sensitive documents over email. If you transfer files digitally, you should encrypt them or only share your documents using an encrypted file-sharing service.
• Learn to recognize and avoid phishing emails, threatening calls and texts from thieves posing as legitimate organizations such as your bank, credit card companies.
• Never click on links or download attachments from unknown or suspicious emails.
• Protect your personal data. Don’t routinely carry your Social Security card, and make sure your tax records are secure.
• Try to file your taxes early — before a scammer can.
• Don’t believe anyone who calls and says you’ll be arrested unless you pay for taxes or debt — even if they have part or all of your Social Security number, or they say they’re from the IRS.

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