Solomon & Hoover CPAs, PLLC Blog

More and more we are seeing clients become victims of identity theft for tax reporting purposes.  We submit the client’s return electronically and the system rejects it due to identity theft.

• What does this mean? 
• How did this happen? 
• What steps can be taken to prevent this? 
• What happens next? 

These are all very good questions and we have the answers!

Identity theft occurs when one person submits a tax return using another person’s social security number.  The user creates a fictitious return using fictitious income and expenses in order to generate a refund for their self.  The return is generally simple and unassuming so that no “red flags” are tripped and the refund is processed without question.

In order for the thief to be successful in his or her quest, an alternative social security number to their own is needed, and the fake return needs to be accepted before the legitimate identity holder’s return is accepted.  Filing your return early and safeguarding your personal information are excellent ways to prevent this from happening to you.

If you are unfortunate enough to have had this happen to you, the IRS has a process in place to fix the problem.  Notify the IRS immediately of the incident. They have a specific department designed to handle these issues.  Call the IRS Identity Protection Specialized Unit at 1-800-908-4490. Your accountant should be able to do this for you.  The electronic filing database will not accept duplicate social security numbers, so you must mail your return in.  Included with your return should be a filled out copy of the IRS Identity Theft Affidavit (Form 14039 – obtain it here) along with at least one copy of the following:

• Driver’s License
• Passport
• Social Security Card
• Other valid U.S. Federal or State government issued ID

If you are a victim, the IRS will issue you a PIN number that is required to be entered on page 2 of subsequent tax returns filed (near where you sign).  The PIN will be mailed to you and will not be reissued so DO NOT LOSE this number.  This is very important.  This is the only way the IRS will know that a return filed with previously stolen information has been submitted by the legitimate owner.

If you haven’t been victim, but you think you are at risk, you can be proactive in preventing a problem from occurring.  For example, if you lost your wallet or your purse was stolen.  Maybe your computer was hacked or you let your firewall protection service expire.  Call the IRS Identity Protection hotline or file the Identity Theft Affidavit.  There is a specific area for those who may be at risk.  It is always better to be over prepared than under prepared.

As always, consult your CPA for more tips and precautions regarding Identity theft.