You try to file your tax return and find out that someone has already filed under your Social Security Number. This means that you’re a victim of tax identity theft – or more specifically, stolen identity refund fraud.
You follow the instructions to file your return with the IRS by mail – and attach Form 14039, Identity Theft Affidavit, to report your identity theft.
You send it off to the IRS. Now what?
The IRS will work to correct your stolen identity refund fraud, issue your refund (if you’re getting a refund), and protect you from future tax identity theft.
This process can take as little as three months or as long as a year, depending on your circumstances.
Here’s what will happen at the IRS and what to expect during that time:
1. The IRS will send you a notice.
First, the IRS will acknowledge your reported tax identity theft. Within 30 days after the IRS gets your Form 14039, you’ll get a letter telling you that the IRS received your affidavit.
During this time, the IRS may ask you to prove your identity, typically with letter 5071C. If you’re one of the few people selected to prove who you are, you may need to answer questions about past returns.
2. Your case will get special attention at the IRS.
The IRS has employees dedicated to addressing tax identity theft. These employees are a part of the IRS Identity Theft Victim Assistance department, which resolves tax identity theft issues and communicates with victims.
If this isn’t your first time filing a return, these IRS representatives will review your tax account to see how many tax years may be affected.
Identity Theft Victim Assistance will also:
- Make sure the IRS correctly processes your latest return.
- Issue your refund (if you’re getting one).
- Remove any fraudulently filed returns from your tax account.
- Place an identity theft indicator on your account.
3. The IRS will flag your tax account.
The identity theft indicator lets the IRS know to give extra scrutiny to any tax returns filed under your taxpayer identification number. This flag helps the IRS better detect possible future fraudulent return filings and stop the return before sending any refund.
Once you have an identity theft indicator, the IRS will send you a notice letting you know that the flag is in place. The indicator will remain on your account indefinitely.
4. The IRS will resolve all issues and close your case.
If the IRS discovers other tax years with identity theft-related issues, the IRS will resolve all the issues before closing out your case. Once everything is resolved, the IRS will send you a notice.
However, you may have to point out other issues that the IRS may not be aware of. For example, if someone is using your taxpayer identification number for employment, the IRS won’t know it, unless the IRS selects your return for audit or an underreporter inquiry.
How long does that take? It depends on the complexity of your problem. The IRS says that it resolves tax identity theft cases in 120 to 180 days, depending on your circumstances. But in many instances, victims of complex tax identity theft have experienced resolution times of more than one year.
Victims of tax identity theft should check in periodically with the IRS to make sure that the IRS is working to complete their case.
5. You may be assigned a special number to use on your tax return every year.
Taxpayers with past identity theft are given a special number, called an Identity Protection Personal Identification Number or IP PIN, to use in filing their future returns.
The IP PIN is a six-digit number that you get every December by mail (IRS Notice CP01A). You then enter it on your tax return to provide an additional layer of security. In fact, once the IRS issues you an IP PIN, you have to enter it to be allowed to e-file your return.
Right now, there’s no way to opt-out of the IP PIN program once you’re enrolled. The IP PIN requirement may change in the future when the IRS improves its identity protection and authentication measures.
There are other things you’ll need to do
If you’re a victim of identity theft, the Federal Trade Commission (FTC) suggests that you also:
- File a complaint with the FTC.
- Place a fraud alert on your credit records.
- Contact your financial institutions to verify your accounts and purchases.
There may be nothing to worry about in addition to your tax identity theft. To be on the safe side, following these suggestions from the FTC will protect you further if the identity theft affects more than your taxes.
Get expert help to make sure there aren’t other problems on your tax account
Tax identity theft is unnerving.
One action to take to assure yourself that it was isolated to refund fraud for one year is to look further into your IRS account.
When someone has used your identity to file a return, you could face other tax problems. For example, someone could have used your taxpayer identification number for employment – and, as a result, the IRS will receive Forms W-2 or 1099 reporting income under your name. This can cause you to be selected for audit or receive IRS notices about income you didn’t report. Looking closer at your tax account can help assure you that no one is using your identity for employment.
Unfortunately, tax identity theft is more common than many people think.
Because of its prevalence, tax professionals have become experienced in helping clients with this issue. Tax professionals can cut through much of the IRS red tape by contacting the IRS directly on your behalf through a special practitioner hotline. An experienced tax professional can identify all the issues and work toward restoring your identity with the IRS.