Unfortunately in the past week, I have had to tell two clients that when we tried to electronically file their return it was rejected because their social security number had previously been used to file a return.
I can’t tell them how this happened, but what I have learned in the past two years, is that more and more identity theft is occurring with people obtaining someone’s name and social security number and fraudulently filing a “fake” tax return so that they can receive a large tax refund. Obviously they set up new addresses and banking account information so the refunds are sent to them. Sadly, the IRS policies and computer technology have not kept pace with the scams and therefore, more and more of these situations are arising.
So what should you do if happens to you? Following are six steps you should take if you fall victim to identify theft.
- File a police report.
- File a complaint with the Federal Trade Commission at identitytheft.gov or call the FTC Identity Theft hotline at 1-877-438-4338.
- Contact the major credit bureaus and have a “fraud alert” placed on your account:
- Close any accounts that have had activity or been opened without your permission.
- Respond to any IRS notice immediately.
This was how my first tax-related identity theft case was discovered. The taxpayer received a notice from the IRS stating that they could not process her refund until they had gathered additional information. This was strange as she had not even filed her return yet!!
- File IRS form 14039, Identity Theft Affidavit with the IRS.
If your return was rejected when you tried to e-file, you will need to complete this form and mail it with the paper copy of your tax return to the IRS. The affidavit also requires a form of identification to be sent with it.
If you have previously contacted the IRS and received no resolution, you may contact them at 1-800-908-4490 to speak to one of their specialized team members. And finally how does it affect the taxpayer and their return? A question I am often asked is “Will I still receive my refund, or will the IRS not issue me a check since they gave my money to someone else first?” To date, all of my clients who have experienced tax-related identity theft have received their refunds in full, however there is usually a delay of six to twelve months before their money arrives. And good to know – these clients have not had any other financial or credit information affected. It seems that the culprits just used their social security number to get an illegal refund of tax dollars. Unfortunately, we as taxpayers shoulder the financial burden in paying out millions of dollars in these fraudulent cases.
The IRS is now issuing PIN numbers to be used on the return for the next year for those who are victims of tax-related fraud. This has worked very well for my clients who were given a PIN. If you receive a letter from the IRS with a PIN, be sure you forward this number to your tax preparer for use with your return.
Something else new this year is as a victim you can request a redacted copy of the fraudulent return that was filed under your social security number. With this information, you might be able to determine the tax impact and how closely the fraudulent return resembles your actual return. I am not sure if this will be of any help to you in trying to determine what happened, but I am sure it would be interesting to see.
Remember that the IRS does not initiate contact with taxpayers via email so DO NOT give any personal or financial information to a request via email. I have seen a tremendous increase in the past year in IRS impersonation scams. If you do receive one of these emails, the IRS is asking that you report this suspicious activity to email@example.com. or call 1-800-366-4484.
Obviously no one is immune from identity theft, but knowing what to do if it does happen will give you a head start in remedying the situation.
A little more about us:
Located in West Des Moines, Iowa with a branch office in Winterset, Iowa, McGowen, Hurst, Clark & Smith, P.C. celebrates 65 years of extending excellent service to our clients, providing them with accounting, auditing, consulting and investment expertise.
Established in 1946, our staff has grown from 3 to 60 employees, making us large enough to provide our clients with a broad base of experience and resources, yet small enough to offer very personalized service—which we feel makes us stand apart from other CPA firms. In addition to the traditional services of Accounting, Tax Preparation, Audit and Business Consulting, MHC&S offers our clients specialized services including Estate Planning, Business Valuations, Cost Segregation Studies, Retirement Planning, QuickBooks Training, Financial Advisory Services, Fraud Detection and Deterrence, Business Succession Planning, Litigation Support and more.
MHC&S is a member of CPAmerica International, Inc., a national association of accounting firms offering membership to only 90 firms throughout the United States. This association offers a wide pool of additional technical expertise to the members firms, as well as continuing professional education necessary to maintain the degree of excellence which MHC&S feels is vital in today’s business environment.