How to Address Tax Identity Theft and Refund Fraud
Tax identity theft and refund fraud, at a glance:
- There are two types of tax identity theft: stolen identity refund fraud and employment-related tax identity theft.
- The IRS requires tax identity theft victims to report the theft and prove their identities to correct the issue.
- The best way to protect yourself from tax identity theft is to get an Identity Protection Personal Identification Number (IP PIN) from the IRS.
You can get expert help fixing a tax identity theft or refund fraud issue.
What you need to know about tax identity theft and refund fraud
Tax identity theft happens when someone uses your name and Taxpayer Identification Number (like your Social Security Number or Individual Taxpayer Identification Number) on tax documents. People do this for one of two reasons:
- To file a return to get a fraudulent refund. When you try to file your return, the IRS will reject it because someone already filed a return using your information. This is the most common type of tax identity theft and fraud.
- To get a job and report that income under your Social Security Number. You’d find out about this type of tax fraud if the IRS audits your return, sends you a notice about unreported income, tries to collect a balance you don’t owe, or requests a tax return when you aren’t required to file.
If you think you could be a victim of tax identity theft, there are several important steps you or your tax professional should take to address it and prevent it going forward.
Here’s what to do.
How to address tax identity theft and refund fraud
1. Confirm the tax identity theft and all the resulting problems.
- If you suspect tax identity theft, request transcripts or call the IRS to research your IRS account. Confirm whether someone filed a fraudulent return or information statements under your Tax Identification Number.
- If you confirm tax identity theft, follow step 2 below.
- Refund fraud victims have to file a paper return for the year.
- Employment-related fraud victims should research their filed returns and information statements from several years back to identify all the resulting compliance issues.
2. Document the identity theft with the IRS.
- Complete Form 14039, Identity Theft Affidavit. Attach the required documents to prove the tax identity theft.
- Send the form and the documents to the IRS. Depending on your situation, you’ll file the documents with your paper return, send them to the address/fax number on the notice you received, or send them to the appropriate IRS compliance unit.
- The IRS may issue you an identity protection personal identification number (IP PIN) or place a preliminary identity theft marker on your IRS account.
- Notify other government agencies, financial institutions, and credit bureaus about the theft.
3. Address any related compliance issues.
- If your IRS account shows that you owe taxes because of the identity theft, call the IRS to ask for a “collection hold” until you can fix the problem. The IRS won’t try to collect the balance using notices, liens and levies if a collection hold is in place.
- If you have an underreporter notice (also called a CP2000 notice) or an audit, directly notify the IRS compliance unit handling the issue about the identity theft. Ask the unit to suspend the notice/audit process while you fix the identity theft issue. You may also eventually need to provide the compliance unit with more information about the theft to prove the correct return.
- If your identity theft issue has caused you financial hardship (such as a delayed refund, levy, lien, etc.), you may need to involve the IRS Taxpayer Advocate to request urgent relief.
4. Monitor your IRS account.
- Confirm with the IRS that it placed the identity theft marker on your account. If the IRS issued you an IP PIN, each year (usually in December), the IRS will send you a letter with a new IP PIN. Use the IP PIN to file your tax return.
- Periodically request your IRS account transcripts and your wage and income transcripts to monitor your account for identity theft.
How to get expert help
Your H&R Block tax professional can help you navigate the complexities of fixing tax identity theft.
Bring these six items to your appointment
- A copy of your notices related to the tax identity theft
- If applicable, a copy of all police reports and other documentation to substantiate the tax identity theft
- A copy of your driver’s license, Social Security Card or other government identification to prove your identity to the IRS
- A copy of the correct return filed or to be filed. If you haven’t filed, bring the information needed to complete your tax return.
- If the IRS has levied you, bring your employer’s and/or financial institution’s contact information (name, address, phone and fax number).
- A copy of any tax returns filed the year before and the year after the year in question
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