With more and more taxpayers filing their personal income tax returns electronically (commonly referred to as e-filing), the problem of tax return related identity theft has been rapidly growing. In early February a number of states temporarily suspended their receipt of e-filed personal income tax returns submitted by TurboTax due to widespread reports of identity theft. TurboTax temporarily suspended all state tax filings for a short period and has since resumed them with added security measures.
There are typically two ways that a taxpayer becomes aware of tax return identity theft. One is where the tax return is rejected by the Internal Revenue Service with an explanation that the IRS has already received an electronically filed income tax return using the taxpayer or spouse social security number. The other situation is where the taxpayer receives IRS correspondence referring to their recently filed personal income tax return, however, the taxpayer has not yet filed. Sometimes the correspondence will be addressed to the taxpayer and a spouse who they are not married to, further evidence of identity theft. The correspondence usually is generated by the IRS from Austin, Texas.
The IRS website, www.irs.gov, contains a significant amount of information on this subject. Taxpayers will have to revert from e-filing to paper filing for the current year although subsequent years can be filed online (remember to attach those W-2 forms). There are also a number of other actions to consider if victimized including contacting the local police, filing a complaint with the Federal Trade Commission and contacting the three major credit bureaus to place a fraud alert on your credit records.
IRS Form 14039, Identity Theft Affidavit, should be filed to alert the IRS of the situation. This form requires the taxpayer to provide some form of identification – copies of either a passport, driver’s license, social security card or other government issued identification. One can call the IRS Identity Protection Specialized Unit at 1-800-908-4490 to seek assistance.
The New Jersey Division of Taxation has a similar form, IDT-100, Identity Theft Declaration that victims of tax return identity theft should file. This form can be obtained from the Division of Taxation web site at www.state.nj.us/treasury/taxation. A taxpayer can submit information online via the web site pertaining to the identity theft matter. The New York State Department of Taxation & Finance has a similar Identity Theft Declaration form, DTF-275, available on their web site at www.tax.ny.gov.
Within the past year there has been a rash of IRS scams that have come to light, which the IRS has publicized on both its web site and via YouTube videos. The IRS has emphasized that initial communication with taxpayers always occurs via U.S. Postal Service mail. Many taxpayers have reported receiving threatening telephone calls from individuals claiming to be IRS employees (they recite an ID number as an IRS employee typically does) requesting the taxpayer to disclosure their social security number or else face harsh consequences such as jail time. Various e-mail scams will reference a refund on the subject line and usually will request the recipient to click on a link in order to have the refund processed. The IRS does not do business in this fashion. If a taxpayer is entitled to a refund they either receive a check or the refund is direct deposited into a bank account if that information was entered on the tax return. If there is a payment discrepancy the IRS will generate written correspondence via regular mail. State taxing authorities operate in the same way. While legitimate IRS employees utilize e-mail when working with tax practitioners, e-mail is not utilized in connection with the approval of and issuance of income tax refunds.
Neil Becourtney, CPA
CohnReznick LLP
