This year’s tax season wrinkle? Identity theft
Posted On: 6-2-2015 | Posted By: Tory Brondel, CPA
The big story of this year’s tax filing season was the significant increase in tax-related identity theft affecting taxpayers nationwide.
Data regarding the number of affected taxpayers or the amount of fraudulent refunds paid to scammers this year is not yet available, but anecdotal evidence seems clear: more taxpayers experienced tax-related identity theft in 2015 than ever before. And, identity theft issues have not been limited to fraudulent tax returns: the IRS recently announced 100,000 accounts were hacked through the agency’s “Get Transcript” application.
Tax-related identity theft occurs when a scammer uses a taxpayer’s Social Security Number to file a tax return claiming a fraudulent refund payable to the scammer’s bank account. The scheme comes to light when the real taxpayer attempts to file the return and it is rejected by the Internal Revenue Service or a state taxing authority because the fraudulent return is already on file.
WK’s clients were not immune to this type of fraud, and we established specific procedures to handle the rejected returns and monitor the issue. Our team of tax professionals was able to work with the IRS and state departments of revenue to create a streamlined plan of action to resolve the discrepancies for our clients in an efficient manner.
If you were an unfortunate victim of tax-related identity theft, please know we understand how unsettling it can be. We have taken the necessary steps on your behalf to notify the IRS so they can process the correct tax return. Additionally, the IRS is working to resolve every tax-related identity theft claim they’ve received, and the agency’s stated turnaround time averages 120 days (although it’s common to take longer than that).
The IRS has developed an Identity Protection Personal Identification Number (IP PIN) for taxpayers who are potential victims of Identity theft. In mid- December 2015, the IRS will issue CPO1A notices which contain a 6-digit IP PIN and instructions on how to use it. The notice will be sent to taxpayers meeting the following criteria:
- You reported to IRS that you are a victim of identity theft;
- IRS identified you as a victim of identity theft; or
- You participated in the 2014 IP PIN pilot program for residents of FL, GA or DC.
Taxpayers can also choose to opt into the program if they receive a CP01F notice from the IRS. This notice will state there is an identity theft indicator on your account. Additionally, if you are a resident of the states listed above and haven’t already opted in, you may do so for 2015.
If you receive an IP PIN, please provide it to your WK advisor immediately so he or she can properly file your 2015 tax return next spring. You will receive a new IP PIN by mail each December in future years.
You should also note the IRS recently changed its policy and now allows victims of tax-related identity theft to obtain copies of the fraudulently filed returns so they can know how much personal information was available to the scammers. Taxpayers also need to ensure that third parties, such as mortgage lenders or college financial aid vendors, are getting the correct tax return information, and not a fraudulent return transcript.
We urge you to contact your WK advisor immediately if you receive a notice from the IRS, the Missouri Department of Revenue, or any other state’s taxing authority. You can reach us at (573) 442-6171 or (573) 635-6196, and we will be glad to work on your behalf.