IRS TAX TIPS: Special Edition Tax Tip 2013-05
Protecting taxpayers and their tax refunds from identity theft is a top priority for the IRS. This year the IRS expanded its efforts to better protect taxpayers and help victims dealing with this difficult issue.
When your personal information is lost or stolen, it can lead to identity theft. Identity thieves sometimes use your personal information to file a tax return to claim a tax refund. Then, when you file your own tax return, the IRS will not accept it and will notify you that a return was already filed using your name and social security number. Often, learning that your return was not accepted or receiving a contact from the IRS about a problem with your tax return is the first time you become aware that you’re a victim of identity theft.
How to avoid becoming an identity theft victim.
• Guard your personal information. Identity thieves can get your personal information in many ways. This includes stealing your wallet or purse, posing as someone who needs information about you, looking through your trash, or stealing information you provide to an unsecured website or in an unencrypted email.
• Watch out for IRS impersonators. Be aware that the IRS does not initiate contact with taxpayers by email or social media channels to request personal or financial information or notify people of an audit, refund or investigation. Scammers may also use phone calls, faxes, websites or even in-person contacts. If you’re suspicious that it’s not really the IRS contacting you, don’t respond. Visit our Report Phishing web page to see what to do.
• Protect information on your computer. While preparing your tax return, protect it with a strong password. Once you e-file the return, take it off your hard drive and store it on a CD or flash drive in a safe place, like a lock box or safe. If you use a tax preparer, ask how he or she will protect your information.
How to know if you are, or might be, a victim of identity theft.
Your identity may have been stolen if the IRS notifies you that:
• You filed more than one tax return or someone has already filed using your information;
• You owe taxes for a year when you were not legally required to file and did not file; or
• You were paid wages from an employer where you did not work.
Respond quickly using the contact information in the letter you received from the IRS so that we can begin to correct and secure your tax account.
If you think you may be at risk for identity theft due to a lost or stolen purse or wallet, questionable credit card activity, an unexpected bad credit report or any other way, contact the IRS Identity Protection Specialized Unit toll-free at 1-800-908-4490. The IRS will then take steps to secure your tax account. The Federal Trade Commission also has helpful information about reporting identity theft.
If you have information about the identity thief who used or tried to use your information, file a complaint with the Internet Crime Complaint Center.
For more information – including how to report identity theft, phishing and related fraudulent activity – visit the Identity Protection home page on IRS.gov and click on the Identity Theft link at the bottom of the page.
IRS Works to Protect Taxpayer Refunds, Detect and Resolve Identity Theft Cases
The IRS takes identity theft-related tax fraud very seriously and realizes that identity theft is a frustrating process for victims. By late 2012, the IRS assigned more than 3,000 employees — more than double from 2011 — to work on identity theft-related issues.
The IRS continues to enhance its screening process to stop fraudulent returns. During 2012, the IRS protected $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.
The IRS recently announced that a year-long nationwide focus on tax refund fraud and identity theft has resulted in more than 100 arrests in 32 states and Puerto Rico. In January 2013 alone, the IRS targeted 389 identity theft suspects resulting in 734 enforcement actions. To learn more, see IRS Intensifies National Crackdown on Identity Theft on www.IRS.gov.
RSS Comment: The IRS may be sincere in its efforts to assist taxpayer victims of ID Theft, but sincerity does not beget efficiency. Regrettably, my experience tells me that one who experiences this unfortunate event will find frustrating IRS’s clumsy efforts to separate the genuine taxpayer’s account from the bogus return filed by the fraudster. For example, I’ve experienced the following:
- Taxpayers e-file a joint return.
- IRS rejects return as an earlier return received using husband’s SSN.
- Taxpayer submits as advised by IRS a paper return with an ID Theft Affidavit.
- No response received for months until, IRS matching program Letter CP-2000 received matching husband’s Forms 1099 received, with bogus return which, of course, did not include any of the taxpayers dividends and interest. The CP-2000 indicates there is large unreported dividend and interest income which of course is nonsense.
- Taxpayer Advocate contacted and after more months of waiting, taxpayer assured that his account has been separated from the bogus return and all is good.
- Months later, taxpayers wife receives notice asking for her return for the year for which the joint return was originally e-filed and then paper filed.
In another case, IRS issued a Notice of Deficiency to the honest taxpayer proposing a deficiency for disallowing a refundable credit on the bogus return.
Problems for taxpayers:
- Refund is due on the original legitimate return is delayed and the honest taxpayer waits and waits and waits.
- Taxpayer must pay for the professional time to deal with the IRS inefficiency.
- Process treats the victim like a criminal.
National Taxpayer Advocate criticism of IRS handling of ID Theft cases:
In her 2012 report to congress the TA stated in part:
- IRS is moving backward in retreating from a centralized approach to assisting ID theft victims from beginning to end, thereby increasing the burden on taxpayers and risk that some may fall through the cracks.
- As of September 30, 2012, IRS had almost 650,000 ID theft cases in inventory.
- “The victim is often sent on a journey through IRS process and procedures that may take years to complete.”
- ID theft cases often involve more than one issue and now comprise 25 percent of the TA Service’s (TAS) cases.
RSS Comment: Without TAS assistance, it is very difficult to resolve ID Theft cases, but as noted in the above example, TAS assistance is not a foolproof solution. The digital universe is more convenience but also more threatening to our privacy, sensitive data and personal identity. The wise will follow IRS suggestions and employ professional assistance and the TAS to resolve the digital entanglements that harm and complicate life for victims of ID theft crimes.
Copyright 2013 re. comments by Robert S. Steinberg, Esquire
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