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Post Date:  11/23/2015
Last Updated:  11/23/2015

Summary
Cross References
- www.irs.gov
- IRS Pub 4557, Safeguarding Taxpayer Data
- IRS Pub 5027, Identity Theft Information for Taxpayers
- IRS Pub 5199, Tax Preparer Guide to Identity Theft

At a recent tax seminar attended by authors from TheTaxBook, the speaker said certain IRS administration officials with knowledge of the subject told him unofficially that 7% of electronically filed tax returns this past filing season were fraudulent, and that due to budget cuts, only seven IRS employees were available to work on resolving these identity theft cases. The IRS is aware that requiring PINs or electronic passwords could prevent most cases of identity thieves from filing fraudulent returns, but their computer systems are too old and outdated to handle all of the PINs that would be required for every taxpayer in the nation to use one.

Tax-related identity theft occurs when someone uses a taxpayer’s stolen Social Security number and name to file a tax return claiming a fraudulent refund. Often, the taxpayer does not know his or her name and Social Security number has been stolen until he or she tries to file a legitimate tax return. The electronically filed return then gets rejected with an error code stating the taxpayer has already filed a return using that name and Social Security number. The legitimate taxpayer then has to go through a long process with the IRS in trying to resolve the issue, leading to delays in any legitimate refunds due the taxpayer.

This article discusses the steps to take when a taxpayer’s identity has been stolen, along with helpful suggestions on avoiding identity theft.

Steps to Take When a Taxpayer Becomes a Victim of Identity Theft
- File a police report.
- File an FTC complaint at www.ftc.gov and learn how to respond to it at identitytheft.gov.
- Contact one of the three major credit bureaus to place a fraud alert on the taxpayer’s credit records:
- Equifax, www.Equifax.com, 1-800-525-6285
- Experian, www.Experian.com, 1-888-397-3742
- TransUnion, www.TransUnion.com, 1-800-680-7289
- Contact the taxpayer’s financial institutions and close any accounts opened without the taxpayer’s permission, or accounts that have been tampered with.

It the taxpayer’s Social Security number is compromised and the taxpayer knows or suspects he or she is a victim of tax-related identity theft, take these additional steps:
- Respond immediately to any IRS notice and call the number provided.
- Complete IRS Form 14039, Identity Theft Affidavit. Use a fillable form at www.irs.gov, print, then mail or fax according to the instructions on the form.
- Continue to pay taxes and file tax returns, even if paying and filing returns must be done by paper filing.

If the taxpayer previously contacted the IRS and did not have a resolution, contact the Identity Protection Specialized Unit at 1-800-908-4490.

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