Tax Identity Theft and Refund Fraud – What You Need to Do

Every year, tax fraudsters attempt to trick unsuspecting taxpayers into sharing their personal information in order to steal it. During the last couple of years, tax identity theft and refund fraud have become a very serious problem, affecting a large number of taxpayers and the IRS alike. Therefore, we must make sure that we do not share our personal information with anyone except our trusted tax advisor. The IRS also recommends filing our returns as soon as possible to avoid this kind of situation. Here is what you need to do if you are a victim of tax identity theft and refund fraud.

Confirm You Are a Victim of Tax Identity Theft

One of the very first steps to take if we think we might have been a victim of tax identity theft is to confirm our suspicion. In order to do this, we need to get in touch with the IRS to research our account. This will help us find out if someone has filed a fraudulent return using our Tax ID. If we confirm that a fraudulent return was filed, we need to then file a paper return for the year. We also need to research previous years’ returns to see if this has happened before or if this has just happened this year.

Document the Identity Theft

Once we have confirmed we were victims of tax identity theft, we need to document and prove the fraud to the IRS. This is done by completing Form 14039 Identity Theft Affidavit, attaching all the documents that are necessary, and sending it to the IRS. This way, they will give us an IP PIN, or identity protection personal identification number, or place a marker on our IRS account.

We should also notify other government agencies, financial institutions, and credit bureaus regarding the identity theft issue. This will help us be more protected in case they used our information to commit other fraudulent transactions.

Address Every Possible Compliance Issue

When we are victims of identity theft, we might have to take care of several compliance issues. For example, we might have an outstanding tax balance, for which we can ask for a collection hold. We can also be subject to an underreporting notice or an IRS audit. If this is the case, we should get in touch with the IRS and ask them to suspend the notice until we have our identity theft issue taken care of.

Remember to Monitor Your IRS Account

Lastly, if we have been victims of tax identity theft and refund fraud, whether it happened recently or in previous years, we need to constantly monitor our IRS account. First of all, we need to confirm with the IRS that they placed an identity theft marker on our account. Also, we need to remember to use the IP PIN the IRS gave us in order to file our tax returns in a timely manner. Periodically requesting our account transcripts and wage income transcripts will also help us monitor our account and identify any other fraud issues we might have missed.

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