Most of us may think that Identity Theft just isn’t that prevalent. However, ID thieves steal the identities of about 2.5 million deceased Americans every year. This is over and above the hacking schemes we hear about almost daily. The most targeted groups of people are the deceased, children, prisoners and the elderly. These general categories represent people who may not need to file and therefore the ID numbers can possibly be used over and over. It should be noted that in the National Taxpayer Advocate, Nina Olson’s testimony to the House of Representatives Subcommittee on Government Operations more than a year ago said, “We have heard of organized criminals who have given up drug trafficking to engage in the much easier, safer and just as lucrative endeavor of tax refund fraud. The potential benefits seemingly far outweigh the potential risk, despite the increased focus on prosecuting individuals charged with fraudulent tax refund schemes.”
IRS has instituted a complex vetting process for any returns which may appear fraudulent. At times the vetting comes through the back door. A taxpayer may have a reported W2 or even 1099R with an incorrect EIN. In processing a return and receiving correspondence from the taxpayer, IRS then begins tracking all reported W2’s with the questionable EIN.
When you receive a letter from IRS – not a phone call, not a text message and not an email – it is important to respond immediately. The letter regarding identity theft issues could be a 4464C, 5071C 4883C or Notice CP01B. There are two ways to immediately respond. One is to call the phone number on the letter or notice or to go online to the Identity Verification Service website and begin the process of showing correct identity for the IRS.
If a tax return has been filed electronically and rejected because “someone” used one of the social security numbers, the return must then be filed as a paper return. It is helpful and good practice to also include the Form 14039 with the return which is particularly for identity theft. A business that is impacted will be sent the 14039B. This form for business is not available on line and is sent by IRS. Be sure all identity information sent to IRS is very clear and legible. Faxing is not the best route as the copies often are not clear.
Other items that need to be addressed in this situation are: if the theft involves W-2’s, social security will need to be notified; review all financial information; notify the state in which you live of the identity theft; report to the police – although this is more a courtesy and backup for you. Each year following a theft issue in the past, IRS has had available an IP PIN process. This allowed each taxpayer to file with a unique number. However, that system is currently on hold. Filing as early as possible is one way to stop fraudulent filing of your number.
If theft has occurred the process can take nearly 10 months. IRS tries to finish in less time but the average time is around 10 months. Patience becomes a virtue has more meaning when dealing with IRS.
Raskob Kambourian Financial Advisors is an independent, fee-only comprehensive financial advisory firm registered with the Securities and Exchange Commission. We offer expertise, competitive pricing, and personalized financial services to meet your “Life Planning” needs.