Tax-Related Identity Theft:  What Affected Taxpayers Need to Know

July 2015

The 2015 tax filing season has seen an unprecedented number of tax-related identity theft cases. While the IRS is taking steps to fight identity theft, affected taxpayers should know what steps they should take to protect their identity.  

What is Tax-Related Identity Theft?

Tax-related identity theft occurs when a fraudulent tax return is filed using a taxpayer’s Social Security number to obtain a refund from the IRS. Most fraudulent returns are filed early in the tax filing season, prior to actual taxpayers filing their return. Affected taxpayers often do not learn of the fraud until the IRS rejects their legitimate return on the grounds that a return is already on record. However, in some instances, the IRS suspects identity theft and issues letters to taxpayers requesting authentication of a tax return filed using their Social Security number.

What Steps Should Affected Taxpayers Take?

Upon discovering tax-related identity theft, taxpayers should take the following steps: 

  • File IRS Form 14039, Identity Theft Affidavit (for each spouse if a joint tax return)
  • Determine if your state requires Form 14039 or a state-specific form
  • File a report with the local police
  • File a complaint with the Federal Trade Commission
  • Contact one of the three major credit bureaus to place a fraud alert on your records and review your credit reports
  • Close any fraudulent accounts opened without your permission
  • Respond promptly to any IRS notices you receive
  • Continue to file your tax returns and pay taxes due, although you may not be able to file electronically

What is the IRS Doing to Protect Taxpayers?

In March, the IRS held a Security Summit, with representatives from the IRS, tax preparation and software firms, payroll and tax product processors and state administrators. The group’s primary task was to develop new strategies to reduce identity theft fraud through collaboration. The IRS is focused on taxpayer authentication, fraud identification, information assessment, cybersecurity framework, taxpayer awareness and communication.

In order to authenticate future tax filings, the IRS will assign a six-digit Personal Identification Number (PIN) to taxpayers who have filed Form 14039. Originally, the IRS only notified taxpayers that a fraudulent return had been filed on their behalf. In June, the IRS announced it would, upon request, provide copies of the fraudulent tax returns filed in the victim’s name. Obtaining a copy of the fraudulent return will allow taxpayers to better understand the extent of the identity theft.

As BKD has previously reported, the first point of contact from the IRS will be through an official correspondence sent via mail. The IRS does not contact taxpayers by email, text message or social media to request personal or financial information. This includes requests for PIN numbers, passwords or access information for credit cards, bank and other financial accounts.

If you have questions or concerns regarding tax-related identity theft, contact your BKD advisor.

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