How to Handle Tax Identity Theft: IRS Notices, Forms, and Protection 

Dealing with the IRS is never fun, nor is being the victim of identity theft. Learning that you’re a victim of tax identity theft seems like a tax problem that’s only topped by getting audited or finding out you have a significant unexpected tax bill. 

The goal of this article is to explain some of the warning signs that someone may have stolen your tax identity and what you can do if you suspect that you’re a victim. We’ll also discuss several resources offered by the IRS to spot and fix tax identity theft and ways you can avoid becoming an identity theft tax victim.

What Is Tax Identity Theft? 

Tax identity theft occurs when someone, without authorization, uses your tax information or the tax information of your dependents to file a fraudulent tax return or claim tax benefits they’re not entitled to receive. The identity thief will usually use your name, street address, and Social Security number (SSN) to file this fake return so they can receive a tax refund under your name.

To maximize the tax refund check (or create a refund check when you normally wouldn’t be getting one), the scammer will use false tax information on the return. For example, they might claim deductions and credits you’re not eligible for, report less income than you actually earned, or improperly claim one or more individuals as one of your dependents.

Many instances of tax identity theft occur early in the year, as many taxpayers don’t file their taxes until late March or April. As a result, taxpayers won’t discover what happened until they try to file their taxes and find that a return has already been filed under their name and SSN. 

Warnings Signs of Tax ID Theft 

As mentioned earlier, you’re likely to learn that you’ve become a victim of tax identity theft after your e-filing gets rejected by the IRS. However, here are some other events that could signal someone has stolen your tax identity:

• You or your dependents receive tax documents that don’t make sense. For instance, a W-2 Form arriving in the mail under your child’s name who’s five years old or a 1099 for an employer you never worked for.
• You receive a letter or notice from the IRS about possible identity theft or how the IRS wants you to verify your identity (with a mailing such as a 5071C Notice, Letter 4883C, Letter 5447C, or Letter 5747C).
• You receive a tax transcript or an Employer Identity Number (EIN) you never requested.
• The IRS informs you that they’re using your tax refund to offset a tax balance or that they’re trying to collect a tax from you when you don’t owe that tax (such as claimed unpaid income taxes from years you didn’t earn any taxable income).
• An online tax preparation service or software company sends you a notice about an account you never created.
• Your online tax preparation service or software company sends you a notice about changes to your account that you never made. 

What You Should Do if You Think Someone Stole Your Tax Identity 

If you suspect or confirm someone has fraudulently filed a tax return under your name, what you need to do depends on whether or not you’ve received a letter or notice from the IRS informing you about the incident.

If you learned about the possible identity breach on your own, then you’ll likely need to complete and file IRS Form 14039, Identity Theft Affidavit. You can fill out and submit this form online, but completing a paper copy and mailing or faxing it to the IRS is an option.

After you send it to the IRS, they’ll let you know they received it and are processing it. The IRS aims to process the form, investigate your claims, and take any appropriate actions within 120 days. What appropriate actions are needed depends on the situation but may include removing incorrect information from your tax file, processing your tax returns with correct information, and marking your tax account as having been compromised so that the IRS can be on the lookout for future tax identity theft attempts.

If you learned about the tax ID theft from an IRS letter or notice, you’ll want to follow the instructions provided in that correspondence. In many circumstances, these notices and letters from the IRS will ask you to verify your identity and confirm if you already filed a tax return or not. The easiest way to do these things is to use the IRS’ Identity and Tax Return Verification Service. If this isn’t possible, you can verify your identity over the phone by calling the toll-free number provided on your IRS notice or letter.

Next, you can ask the IRS to enroll in the Identity Protection PIN (IP PIN) Program. Once enrolled, the IRS will mail you a CP01A notice once a year. This notice contains your IP PIN, which is a six-digit number that only you and the IRS know. You’ll use this number when you file your next tax return because if you don’t, the IRS won’t accept the return. While a minor inconvenience, requiring an IP PIN means anyone else who has your SSN and other personal information can’t file a fraudulent tax return under your name.

If you’ve confirmed that you’re the victim of identity theft, you can also report it. At a minimum, you should report it to the Federal Trade Commission’s Identity Theft.gov and the IRS’ Identity Protection Specialized Unit by calling 800-908-4490. 

Reducing Your Risk of Becoming a Victim of Tax Identity Theft 

Using an IP PIN is one of the best ways to prevent someone else from filing an unauthorized tax return. In fact, if the IRS confirms you’re the victim of tax identity theft, they’ll likely require that you use an IP PIN for future tax filings. That being said, there are several steps you can take to prevent identity theft from occurring in the future.

First, for reasons discussed earlier, try to file your taxes as soon as you can, as many instances of tax identity theft occur early in the year.

Second, go to AnnualCreditReport.com to review your credit report for suspicious activity. You can receive a free credit report once per year from each of the three major credit reporting bureaus.

Third, avoid giving anyone else your SSN unless necessary. If you’ve got a new job, your new employer will need your SSN. But a new dentist you’re seeing? Probably not.

Fourth, maintain good online habits and protections. For example, don’t provide personal or financial information in response to an unexpected text message, email, or phone call from your bank claiming they need to verify your identity. If you think the communication is legitimate, contact the bank yourself using a phone number, online contact form, or email address that comes from the bank’s website. Don’t respond directly to a questionable text message or suspicious email.

Also, use multi-factor authentication (if available) for your online accounts and create strong passwords that you can commit to memory. You want to avoid writing out your passwords on a sticky note that you put on your computer at work, for instance. It also helps to run good anti-malware and anti-virus software on your computer.

Finally, you can create an online IRS account using ID.me. This online account lets you examine your tax records, including reviewing any unpaid tax balances. 

Still Not Sure If You’re Safe from Tax Identity Thieves?

The IRS is aware of how common tax identity theft can be and offers several solutions to help you and any other affected taxpayer deal with this predicament. But if having your identity stolen has led to bigger problems with the IRS, then the W Tax Group is here for you. We can assist with any identity verification processes and help you fill out and submit forms. 

We can also communicate with the IRS on your behalf. We’ll be more than happy to discuss how with a free consultation that you can schedule online. Or call us today to get assistance.

Lead Tax Attorney at The W Tax Group

Stephen A Weisberg