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Posted by Dennis Jao

Identity Fraud & Your Taxes

Identity Fraud & Your Taxes

Have you received a letter or an email from the IRS stating that you filed a tax return electronically or that your tax return was accepted or rejected by the IRS, but you did not file this return of income? Someone sent a statement with its details; The SSN they entered was in error, but it matched your SSN, or you may have been the victim of identity theft and tax evasion if someone intentionally filed a tax return with your data. Or did the IRS send you the letter 5701C or 5747C?

If any of the above conditions are true, it does not mean that you have committed fraud. Someone has used your tax information, intentionally or by mistake. We are committed to helping you and other payers protect their data and promote awareness of identity theft practices. Hence, the need for this article. Please check these steps to see if identity theft occurs.

Read on to learn how identity thieves attack people, what you can do to protect yourself against identity theft, and how to report identity theft to the State's IRS and/or tax agencies.

Return rejected due to duplicate SSN.

If you are a proven victim of tax identity theft due to a duplicate or previously filed return with your SSN, complete and submit Form 14039 if your tax return was rejected due to a duplicate SSN. Please note that a return already recorded on your SSN may also be the result of an honest mistake by another employee, not necessarily the result of intentional identity theft.

The IRS will investigate your case, and once the fraudulent tax return is removed from your IRS account, you will receive an IP Pin in the mail at the start of the calendar year or next tax season.

As a confirmed identity theft victim, you cannot turn off the IP PIN code program, unlike other employees. IP-PINs will be sent annually to confirmed victims and participants registered before the 2020 tax year.

Lost IP PIN codes can also be recovered through the online account.

What is Identity Theft?

Identity theft is the fraudulent use of a person's personally identifiable information to commit fraud for profit. Identity thieves look for ways to collect personal information from unsuspecting people to commit fraud, while victims don't know the facts.

  • In 2020, the IRS launched the Identity Theft Center, which will improve online access to identity theft information and data security protection for tax professionals, taxpayers, and businesses.

  • Between 2015 and 2019, the number of taxpayers who reported being victims of identity theft decreased by 80%. In 2019, the IRS received 137,000 taxpayer complaints, up from 677,000 in 2015. It was the fourth year in a row that the number has declined.

  • Between 2015 and 2019, the IRS protected a total of $26 billion in fraudulent refunds by blocking confirmed returns for identity theft.

  • In 2019, approximately 20% of all reports of identity theft and fraud were related to identity theft, which equates to just over 650,000 cases in over 3.2 million reports.

  • Identity theft has increased by 33% in recent years, according to the Department of Justice. The good news is that the IRS's Criminal Investigations Division has helped convict approximately 2,000 identity thieves. They also have more than 1,700 open investigations.

You may be a victim of identity theft if you receive a notification or letter from the IRS attesting to one or more of the following:

• Several tax returns have been completed using your SSN,

• You are entitled to additional charges, have a claim for reimbursement, or have been the subject of collection action against you in a year in which you did not file a tax return and/or

• IRS records show that you received a salary from an employer for whom you did not work.

• If you are the victim of identity theft and a fraudulent tax return is presented with your social security number or your employee, you can request a copy of the fraudulent tax return. You will then receive a tax return transcript redacted or masked by the fraudulent tax return completed with your SSN. Fill out form 4506-F or request a copy of the fraudulent income tax return of the victim of identity theft. The mailing address is on the form.

How are identities stolen?

Identity thieves use a variety of methods to knowingly obtain personal information. One of the most common methods used to obtain electronic information is "phishing." Phishing is a technique used by identity thieves to collect private and personal information by sending bogus electronic communications from a seemingly legitimate source. This can take the form of email communications or phone calls from a financial institution, such as a bank or government agency.

In general, financial institutions and government agencies do not ask for personal information, such as a social security number or password, through email and over the phone. For example, suppose the IRS wants more information about a tax return you have filed. In that case, it will usually mail you a letter, which includes information on how to contact them if you have questions about the notification.

Suppose a person responds to a phishing email or provides personal information to a caller posing as the Internal Revenue Service (IRS). In that case, they will likely send key information to the potential thieves to commit criminal fraud.

How to protect yourself against identity theft

There are several steps people can take to prevent the theft or fraudulent use of their identity. 

Request an IP PIN or an identity protection PIN code.

Prevent phishing

  • Look for emails and/or phone calls asking for personal information (important: the IRS will never email you or call you for a tax return; it will send you a notification by mail first)

  • Examine emails to see where they came from. Make sure the sender is someone you know or a newsletter you have subscribed to

  • Never provide personal or confidential information to an unconfirmed source. Protect your data by keeping it where only you can see it.

  • Contact your financial institution or agency to determine the legitimacy of your email or phone call.

  • Check bank and credit card statements for any unusual activity.

  • Use security software with firewall and virus protection. Make sure the software is always on and allows automatic updates. 

Prevention of tax fraud

  • Follow the steps above to avoid phishing.

  • Choose e-filing or filing partners carefully.

  • Check and examine the books for irregularities.

  • Monitor all communications received from the IRS or tax agencies.

  • Make sure your tax records are protected. If they are electronic, encrypt them with strong passwords.

Report Identity Theft to the IRS

If you believe you have been a victim of identity theft, follow the steps below to report IRS tax fraud:

  • Navigate to the Central Identities Theft section of the IRS.

  • Call the IRS Identity Protection Unit at 1-800-908-4490 for assistance.

  • Complete Form 14039, Identity Theft Report, to prove that you are the real taxpayer (or on behalf of a deceased spouse or someone whose personal information was used to complete a fraudulent tax return). If you are a victim of identity theft and the theft affects your tax records, check box 1 in section A. However, if your identity has been compromised but has not been used in a fraudulent tax return, check box 2 in section A (You can also check this box if personal effects or social security cards have been stolen.)

  • Send Form 14039 to this address: Internal Revenue Service, Stop C2003, Fresno, CA 93888.

  • You may need to submit a police report and a complaint to the Federal Trade Commission on its website if you are a victim of tax fraud.

Important: If you filed your tax return electronically and the IRS rejected it because the SSN was misused, you will need to file the tax return on paper. Attach Form 14039 and other documents to your paper return and send it to the IRS address provided in step 3.

Report tax fraud to local state agencies

Typically, every state has a phone line or address to file a complaint, if not both. To report tax fraud, call a tax hotline or contact the tax office at the address provided. Some states require you to complete a form to submit it. 



Dennis Jao
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