Learning you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations and government agencies, including the IRS. Tax-related identity theft occurs when someone uses your stolen Social Security Number to file a tax return claiming a fraudulent refund.
Many times, you may not be aware that someone has stolen your identity. The IRS may be the first to let you know you are a victim of identity theft after you try to file your taxes.
The IRS combats tax-related identity theft with a strategy of prevention, detection and victim assistance. The IRS is making progress against this crime and it remains one of the agency’s highest priorities.
Here are 10 things to know about identity theft:
1. Protect your Records. Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software.
2. Don’t Fall for Scams. The IRS will not call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from someone claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration (TIGTA).
3. Report ID Theft to Law Enforcement. If your SSN was compromised and you think you may be the victim of tax-related ID theft, file a police report. You can also file a report with the Federal Trade Commission using the FTC Complaint Assistant. It’s also important to contact one of the three credit bureaus so they can place a freeze on your account.
4. Complete an IRS Form 14039 Identity Theft Affidavit. Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by paper.
5. Understand IRS Notices. Once the IRS verifies a taxpayer’s identity, the agency will mail a notice to the taxpayer. The notice says that the IRS is monitoring the taxpayer’s account. Some notices may contain a unique Identity Protection Personal Identification Number (IP PIN) for tax filing purposes.
6. IP PINs. If a taxpayer reports that they are a victim of ID theft (via Form 14039) or the IRS identifies a taxpayer as being a victim, they will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return.
7. Data Breaches. If you learn about a data breach that may have compromised your personal information, keep in mind not every data breach results in identity theft. Further, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.
8. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on How to Report Suspected Tax Fraud Activity.
9. Combating ID Theft. Over the past few years, approximately 2,000 people were convicted in connection with refund fraud related to identity theft. The average prison sentence for identity theft related tax refund fraud was 38 months in 2015, with the longest sentence being 27 years.
Since 2014, the IRS has stopped more than $15 billion of fraudulent refunds, including those related to identity theft. Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed.
10. Service Options. Information about tax-related identity theft is available online. There is a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.
The professionals in our office can answer any questions you may have regarding identity theft, call on us today.
Tim Dilley is a Certified Public Accountant with Cordell, Neher & Company, PLLC, a Wenatchee public accounting firm.