Identity Theft and Your Taxes

If someone used your name or other identifying information without your consent to file a federal tax return, you may be a victim of identity theft.  

Publication 4535, Identity Theft Prevention and Victim Assistance, provides more information on this subject.

The IRS can place an Identity Theft Indicator on your tax account.  This indicator remains on your account for three years.  The indictor flags any tax return submitted with your SSN (or ITIN). 

What you should do...

You should monitor your financial accounts.  If you notice any suspicious or unusual activity on any of your financial accounts, you should report it immediately by doing the following:

1. Contact your financial institutions 

2. Contact the fraud department of one of the three major credit bureaus:

-Equifax: 800-525-6285: www.equifax.com

-Experian: 888-397-3742: www.experian.com

-TransUnion: 800-680-7289: www.transunion.com

3. Check your credit report every 12 months from AnnualCreditReport.com by:

-Visiting www.annualcreditreport.com

-Calling 877-322-8228

-Mailing the Annual Credit Report Request form to: Annual Credit Report, Request Service, PO Box 105281, Atlanta, GA 30348-5281

4. Report any fraudulent activity to your local police or sheriff's department:

-Make sure the police report lists the accounts with the suspicious activity

-Get a copy of the police report, which is called an "identity theft report" (you are entitled to the report under the Fair Credit Reporting Act)

-Keep the phone number of your investigator

-Give the investigator's information to creditors and others who require verification that you were a victim of identity theft

5. File a complaint with the Federal Trade Commission:

-By Telephone: Call FTC's Identity Theft Hotline: 1-877-438-4338

-Online: www.ftc.gov/idtheft

-By Mail: Identity Theft Clearinghouse, Federal Trade Commission, 600 Pennsylvania NW, Washington, DC, 20580

6. Contact your local Social Security Administration office to ensure your earnings records are accurate.

If you need assistance with a federal tax problem you haven't been able to resolve through the normal channels, you can contact the Taxpayer Advocate Service (TAS). TAS is an independent organization in the IRS whose employees assist taxpayers who need help because an IRS action is causing an economic hardship, they haven't been able to resolve a tax problem through normal channels, or they believe an IRS system or procedure is not working as it should.  If you believe you are eligible for TAS Assistance, call 1-877-777-4778.

Identity Theft Affects Businesses As Well As Individuals: January 2014

With the rise of identity theft, the IRS has also seen a rise in the number of tax return-related complaints filed by taxpayers - individuals and businesses alike.

Taxpayers must use Form 14039, Identity Theft Affidavit, in either of these cases:

• If someone has filed a fraudulent return using the taxpayer's Social Security number; or
• If the taxpayer's financial information has been compromised, even if they have not yet specifically had tax-related identity theft problems.

The IRS will flag a taxpayer's account if a Form 14039 is filed, in the hopes that if someone tries to file fraudulently on the taxpayer's account, the IRS will catch the return and stop it from being processed.  In some cases, Form 14039 is requested by IRS after the taxpayer's account has been flagged.

When a fraudulent return is filed, the affected taxpayer faces significant delays while the IRS rectifies the situation.  The wait time can be beyond six months to fix the taxpayer's account and issue refunds after a fraudulent return is suspected to have been filed.

Business identity theft on the rise

Businesses affected by identity theft may be hit with huge employment tax bills related to fictitious income on false Forms W-2.

A business's Employer Identification Number (EIN) could be obtained by a thief from the following sources:

• Filings made to the Securities and Exchange Commission (SEC) such as the Form 10-K, which includes the EIN on its first page;
• Public databases that enable users to search for business entities, which sometimes also display the employer's EIN;
• Websites specifically designed to search for EINs, such as EINFinder.com;
• Business websites, which sometimes openly display the EIN; and
• Forms W-2, W-9, or 1099.

Examples of how a thief might use a business's information include:

• Reinstating a dissolved corporation and filing a tax return in the corporation's name, claiming various business credits and obtaining a refund; and
• Stealing an EIN and issuing fraudulent W-2s, and then filing returns requesting refunds based on this income, which could trigger an assessment for unpaid payroll taxes on these fraudulent wages.