Tax Identity Theft

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Background

The Federal Trade Commission (FTC) estimates as many as nine million Americans have their identities stolen each year.  According to a 1/26/15, FTC press release, tax-related identity theft was the most common form of reported identity theft in 2014.  The FTC received 109,063 complaints about tax identity theft, which accounted for almost one-third of the 332,646 total identity theft complaints.  In fact, 2014 marked the fifth consecutive year that tax-related identity theft topped the list of complaints.

IRS Timeline of Responding to a Tax Identity Theft Case

Taxpayers usually are unaware of an identity theft until they receive a notice from the IRS indicating that multiple returns have been filed or they received wages from an unknown employer.  The situation typically takes many months to correct, and some identity theft victims have experienced a year or more wait before receiving their refund.  In an audit report dated 3/20/15, the Treasury Inspector for General Tax Administration (TIGTA) concluded, based on a statistically valid sample of 100 taxpayer identity theft accounts, that on average the IRS took 278 days to resolve identity theft cases.

Identity Protection Personal Identification Number (IP PIN)

In an effort to help victims, the IRS issued approximately 1.5 million Identity Protection PINs (IP PINs).  The IP PIN is a unique, six-digit number that is assigned annually to victims of identity theft with resolved cases for use when filing their federal tax return.  An IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return.  When a taxpayer has an IP PIN, it prevents someone else from filing a tax return with their SSN as the primary or secondary taxpayer (spouse).

The IRS sends a new IP PIN each December by mail.  When a taxpayer receives a Notice CP01A, the IP PIN is located in the left column, last paragraph, which states: “Your assigned 20XX IP PIN is: _____.”  Taxpayers who lose their IP PIN or don’t receive a new one can log into www.irs.gov through “Get an IP PIN” or visit “Lost or Misplaced IP PINs” for further information on how to retrieve it.

Taxpayers, who were assigned an IP PIN, must use it to confirm their identity on the current year federal tax return and any delinquent returns filed during the calendar year.  A return e-filed with the taxpayer’s correct SSN, but an incorrect or missing IP PIN will be rejected until the taxpayer submits it with the correct IP PIN or files a paper tax return.  If the same conditions occur on a paper filed return, the IRS will delay its processing and hold the refund until the rightful payee is determined.

Taxpayers are eligible for an IP PIN if they—

  1. received a Notice CP01A from the IRS containing the IP PIN;
  2. received a Notice CP01F from the IRS inviting them to apply for an IP PIN;
  3. filed last year’s federal tax return as a resident of Florida, Georgia, or the District of Columbia;
  4. reported identity theft to the IRS and received a Notice CP01 indicating that an identity theft indicator has been placed on their account; or
  5. were identified as a possible victim of identity theft by the IRS.

Conclusion

The IRS does not contact taxpayers by telephone, text message, or email to request personal or financial information.  Some identity thieves use a stick—angry or threatening demands for immediate payment, while others use a carrot—a payment or refund will be mailed if the requested information is provided.  Furthermore, first contact from the IRS will not be a phone call or email from out of the blue, but rather it will be through official correspondence sent via U.S. mail.

Suspicious online or emailed phishing scams can be reported to the IRS at phishing@irs.gov.  For phishing scams by phone, fax, or mail, call 800-366-4484.  IRS impersonation scams, which appear to be increasing, can be reported to the TIGTA at 800-366-4484.