Identity Theft and Your Income Taxes By William Perez March 26, 2014 Identity theft is one of the most serious problems faced by taxpayers, the National Taxpayer Advocate revealed in her 2013 Annual Report to Congress, with the average case taking 312 days for the IRS to resolve. Kathy Morgan, EA, discusses her experience helping a client deal with the IRS after being an identity theft victim. Its a worldwide crime wave and it can affect every aspect of your life. Im talking about identity theft. In this modern world where everything about everybody is available online, this type of crime is multiplying exponentially across the globe. Every day we see or hear news items about the newest scam, victims of identity theft, and criminals being sentenced. Identity theft is mainly all about your money and, as a tax professional, I thought I would shed a little light on some of the steps that are being taken to help keep identity theft from happening to you and how to get it fixed if it does. Im going to start with the subject I know best, your income taxes. Many victims of identity theft are unaware of the fact that they are a victim until they go to file their income tax return. They usually find out when their electronically filed return is rejected because its already been filed. Or instead of getting their refund check, they get a letter from the IRS saying their refund has been seized and they still owe the IRS money. This is exactly what happened to a young client of mine recently. Instead of his big fat refund check he got a shocking letter from the IRS. They had seized his refund and wanted more money. Lots more money. Upwards of $100K more money. Needless to say he was shocked and terrified. Keep yourself safe by using this quick list of safety measures that can be used to help prevent this crime from happening to you: 1. Do not carry your Social Security card with you and store it in a safe place. 2. Do not just give your Social Security Number (SSN) to anyone who asks for it. Find out why they need it at your doctors or dentists office when they have your insurance information on hand, for example. 3. Never give your SSN, birthday, or other personal information to someone on the phone unless you initiated the call and know who you are talking to and have number 2 above in mind. 4. Never give your information to someone online for the same reasons as listed above. 5. The IRS, other government agencies, and reputable credit agencies will never call you and demand money now as a first contact. The IRS only initiates contacts on balance dues via US Mail. Dont get scammed and report all possible scams to the local police and FTC. (Further on that later.) 6. Use hard passwords and high level firewalls on your computers, pads, and phones. I know auto-save on your passwords and using the same password or a variation on the same password is easy for you. But that makes it easy for the criminals as well! In 2013 the IRS ramped up the investigation, prosecution and conviction of identity theft cases over 200% from the previous two years. Sentences ranged from 2 to 317 months, averaging over 38 months each. The IRS is also expanding their efforts to help local law enforcement with the fraud side of the prosecutions. When you have a suspected case of identity theft dealing with someones income taxes the IRS has developed a whole list of steps to take to assist the victims and try to catch the criminals. They have established the IRS Identity Protection Specialized Unit (IPSU) with over 3,000 employees working full time on these cases and they are swamped! The IRS has also put into place numerous technological improvements to combat this crime. They have upgraded their software to hit on indicators like multiple refunds going to the same address or bank accounts, the same IP address filing large numbers of self-prepared returns, and paid tax preparers not having a Preparer Tax Identification Number (PTIN). More and more of these are getting stopped before they start, however, the criminals find ways around the roadblocks almost as quickly as the IRS can throw them up. Here is a quick look at some of the steps you should take if you or someone you know is the suspected victim of identity theft: 1. If you receive a notice from the IRS that you believe is incorrect, call the phone number on the notice immediately. 2. Contact the IPSU at 1-800-908-4490 ext 245 immediately so they can secure your account until an investigation can be completed. 3. File the IRS Form 14039 immediately and then forward additional material as you dig it up. 4. Make a police report. 5. Report incidents of identity theft to the Federal Trade Commission at consumer.ftc.gov/articles/0277-create-identity-theft-report or call the FTC Identity Theft hotline at 877-438-4338 or TTY 866-653-4261. 6. Contact the fraud departments of the three major credit bureaus: o Equifax - 800-525-6285 o Experian - 888-397-3742 o TransUnion - 800-680-7289 7. Thoroughly review all three credit reports and immediately close any accounts that appear to have been tampered with or opened fraudulently. Also contact and file protests for all those accounts with the agency that holds the account. 8. Be on the lookout for an identity theft PIN that comes in the mail to be used on future income tax returns. Each year a different PIN will be issued and if the return is filed without the PIN it will be rejected. In the case of my client the thief was a close family member who had used the victims identity when he was still a child, run up a huge tax bill, and moved on. This had the effect of keeping my young college graduate client from getting a job in his chosen career field, an apartment, or any kind of credit. He was having to flip burgers and live in an extended stay motel with his family due to the issues on his credit reports. By using the methods described above and a lot of perseverance we were able to get his refunds released, his IRS and credit records cleared and the thief is being prosecuted now on both the federal and local levels. One of the most emotionally devastating effects of this epidemic is that, in a large number of cases, the thief is a friend, colleague or family member of the victim. Yes, a family member! This brings a whole new dynamic to the situation as victims are reluctant to proceed against family and friends. The process of getting an identity theft case processed and the victims records cleared is not a fast one, but, once it takes hold the investigators do a great job. The average time for the completion of a case, not including criminal prosecution, is just over 14 months at this point. The additional manpower and resources that the IRS has dedicated to this problem is decreasing the time lag, but the overwhelming and increasing nature of the problem is making it hard to get ahead of the curve. My best advice is once you complete the steps previously mentioned, is to be vigilant and be patient. Remember, your identity is the most precious thing you own. Care for it in that manner. Here are some other links to help for victims of identity theft: • Social Security Office Identity Theft Pamphlet • The Internet Crime Complaints Commission (IC3) • IRS Helpful Links, YouTube Videos, and Resources for Identity Theft Victims • IRS Listing of Scams and Current Fraud Practices • FTC.gov Identity Theft Protection Suggestions Kathy Morgan has been a Tax professional for over 20 years and is the owner of the tax training company Puzzled By Taxes? I SpEAk IRS! She earned her Enrolled Agent license in 2002 and has completed the prestigious National Tax Practice Institute Fellowship (NTPI). Kathy has been an instructor and writer on income tax for 15 years. She lives and practices in the Shreveport Louisiana area with her husband, kids and grandkids.
Posted on: Fri, 04 Apr 2014 13:16:15 +0000
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