According to the Federal Trade Commission (FTC), 2014 marked the fifth consecutive year that tax identity theft was the number one identity theft complaint filed by consumers.
Tax-related identity theft typically happens when someone uses a person’s stolen identifying information to file a fraudulent tax return and obtain a refund. Practitioners should be alert for signs that identity theft has occurred.
Telltale signs for individuals often include a return being rejected because the client’s SSN has already been used, or a client receiving an IRS notice, such as Letter 5071C, requesting identity verification from your client.
For businesses, receiving an IRS notice concerning a return’s acceptance as an amended return, or fictitious employees should be considered a red flag.
Here are some steps practitioners can take to help clients who have had their tax identity stolen.
- Obtain proper authorization from the client via a signed power of attorney (Form 2848).
- Report the identity theft to the local police department and to the FTC at www.identitytheft.gov or 877.438.4338.
- Contact the major credit bureaus to place a fraud alert on the account: www.equifax.com (800.525.6285), www.experian.com (888.397.3742), or www.transunion.com (800.680.7289).
- Report the identity theft to the IRS by contacting the Identity Protection Specialized Unit at 800.908.4490.
- Contact the Social Security Administration at www.ssa.gov or 800.772.1213.
- Respond to any IRS notices and submit a completed Form 14039 (Identity Theft Affidavit). This form allows the IRS to put an identity theft indicator on the client’s tax account.
In addition, a client whose return is rejected because someone else already filed under that SSN will have to file a paper return for the current year with Form 14039 and Form 8948 (Preparer Explanation for Not Filing Electronically) attached.
Checkpoint IRS Response Library has tools and guidance available to assist clients with tax-related identify theft issues. For more information, visit tax.thomsonreuters.com/IRSResponse or call 800.431.9025.
Download a complete special report, “Assisting Victims of Tax-Related Identity Theft,” at tax.thomsonreuters.com/IDTheft.