Recent headlines have described how identity thieves were able to access taxpayer records through the IRS website. The fraudsters were able to access taxpayer transcripts by submitting previously obtained social security numbers and other personal information. The IRS estimates that 100,000 taxpayers’ accounts were accessed between February and May 2015.
This is a serious breach of sensitive information, but identity theft has been occurring for years. In 2014, the FTC received just over 109,000 complaints about tax identity theft. The FTC also states that tax-related identity theft was the most common form of reported identity theft in 2014. Fraudsters can commit tax identity theft to submit a false return under someone else’s SSN, claim bogus tax credits, and have the fraudulent refunds sent to an address where the fraudster obtains the refund.
Taxpayers are usually unaware that they have become a victim of identity theft until they receive a notice from the IRS stating that multiple returns have been filed or they received wages from an unknown employer. This situation will take many months to correct, and some taxpayers have had their refunds delayed by up to one year while the issue is being resolved.
The Identity Protection PIN
To help victims of identity theft, the IRS has issued roughly 1.5 million Identity Protection PINs (IP PINs.) The IP PIN is a unique, six-digit number that is assigned annually to victims of identity theft with resolved cases. When they file tax returns, the IP PIN must be submitted with the returns. When a taxpayer has an IP PIN, it prevents someone else from filing a tax return under his SSN as the taxpayer or spouse. When a taxpayer has been assigned an IP PIN, any return filed under that taxpayer’s SSN without the IP PIN will be rejected.
Identity Verification Website
In 2009, the IRS began placing markers on taxpayers’ accounts that have been subject to identity theft. The IRS has placed markers on more than one million accounts. Once a marker is placed on a taxpayer’s account, the IRS applies identity theft filters at the time the return is processed to determine whether a return is fraudulent.
Earlier this year, the IRS indicated that they would stop processing suspicious returns that may involve identity theft and send the taxpayer a letter requesting the taxpayer to confirm her identity through the Identification Verification (Idverify) website or by calling the IRS directly. The taxpayer has 30 days to respond to the letter. Once the taxpayer’s identity is verified, she can confirm whether she filed the return. If the taxpayer did not file the return, the IRS will treat the case like an identity theft case and follow appropriate procedures to assist the taxpayer.
Steps to Take
If you suspect that you are a victim of identity theft, you should file a complaint with the FTC and contact one or more of the three credit bureaus (Equifax, Experian, TransUnion) to place a fraud alert on your account.
You should also contact a tax practitioner to review your tax account for suspicious activity.
It should be noted that the IRS does not contact taxpayers by phone, text messaging, or email to request personal or financial information. First contact from the IRS will not be a phone call or email from out of the blue, but rather will be through official correspondence sent via U.S. mail.
Online or email scams can be reported to the IRS at firstname.lastname@example.org. Scams by phone, fax, or mail can be reported to the IRS at 800-366-4484.
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Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.