April 10, 2012

“Tax fraud through identity theft has become an ordinary street crime,” Senator Bill Nelson said in a March 20 hearing.

Nelson, chair of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth, was speaking to a panel of witnesses during a hearing on the IRS’s response to the identity theft problem.

The amount of identity theft cases the IRS received between 2009 and 2011 nearly tripled.

The IRS has new filters to help it spot false returns before they are processed, yet many still get through. Refunds are issued to the fraudsters on debit cards and mailed to a nonphysical address, so catching these people is virtually impossible.

What does this mean for you?

To lessen the chance of fraudsters using your information to file a fraudulent return, the following actions are recommended:

  • File individual returns, especially those with large anticipated refunds, as soon as practicable.
  • Don’t ignore an IRS notice indicating that you’ve received wages from a job you’ve never held.
  • File Form 14039, which puts the IRS on notice of your identity, if you have been an actual victim of identity theft.
  • File Form 14039 if you feel you are a potential victim of identity theft, for example, if you’ve had a lost or stolen purse or wallet, questionable credit card activity, etc.
  • File Form 14039 if you’re the executor for a decedent with a potential refund and recommend that others file for friends and loved ones who have recently died.

If you fall victim to identity theft, from a stolen laptop for instance, you may feel that your IRS information is safe and that you’re not at risk. But you are.

Share any identity theft issues with your accountant as soon as possible. Your accountant will file the appropriate forms with the IRS to protect against the filing of a fraudulent return with your Social Security number.

In addition to helping identity theft victims clear up problems with their IRS accounts, the IRS works proactively to help ensure that these taxpayers do not encounter delays in processing their future returns.

In January 2011, the IRS launched a pilot program for Identity Protection Personal Identification Numbers (IP PIN). The IP PIN is a unique identifier that establishes that a particular taxpayer is the rightful filer of the return.

This program continues to be in place. In December 2011, the IRS mailed IP PINs to identity theft victims for them to use in filing their 2011 tax returns.

Click here to read frequently asked questions regarding the IP PIN.

This tax tip contributed by:

Linda Harding, CPA
Tax Director
CPAmerica International

This article was originally posted on April 10, 2012 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at marketing@grfcpa.com.