Tax Return Identity Theft: What to Do If You Are a Victim
Physicians across the country are being targeted for identity fraud due to access of medical identifiers and licensing information. The Internal Revenue Service is reporting more and more cases of identity theft on a daily basis. Paid tax preparers including CohnReznick LLP are generally required to prepare all client income tax returns for electronic filing (e-filing).We typically become aware of tax return related identity theft in one of two ways. An electronically filed tax return is rejected with the explanation provided that either the taxpayer or spouse social security number has been used on a previously filed tax return. Or the taxpayer receives a letter from the IRS referencing their recently filed tax return, which has yet to be completed.
The first thing that must be done when this occurs is prepare the income tax return for paper filing and include IRS Form 8948, Preparer Explanation for Not Filing Electronically. On Form 8948 the reason for paper filing is noted. W-2 forms need to be stapled to the face of the Form 1040, which is unnecessary when filing electronically.
There are several actions that the victimized taxpayer should then take.
- File IRS Form 14039, Identity Theft Affidavit, which can be attached to the paper tax return or mailed to the IRS on its own. A photocopy of a passport, driver’s license, social security card or government issued identification needs to be attached.
- Contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245.
- Report the matter to the Federal Trade Commission at www.consumer.ftc.gov or the FTC Identity Theft Hotline at 877-438-4338.
- File a report with local police.
- Contact the fraud department of the three major credit bureaus:
- Equifax – www.equifax.com, 800-525-6285
- Experian – www.experian.com, 888-397-3742
- TransUnion – www.transunion.com, 800-680-7289
- Check recent bank statements and credit card statements for unauthorized transactions, closing any accounts that have been tampered with.
- File forms with state taxing authorities alerting them to the identity theft issue such as:
- New Jersey Form IDT-100, Identity Theft Declaration
- New York Form DTF-275, Identity Theft Declaration
What Does CohnReznick Think?
We know that tax return related identity theft, especially for physicians, is occurring with increased regularity. Firm policy mandates that any and every file containing sensitive taxpayer information, such as social security numbers, is safeguarded under stringent guidelines. It should be noted that the IRS does not initiate contact with a taxpayer by phone or via email. Be mindful of individuals purporting to be IRS employees. It could be a phishing or other scheme. Protect your social security number or other personal identification, establish a records retention policy, and restrict access to personal information. Large federal income tax refunds are being more closely scrutinized due to concerns over identity theft; thus, unfortunately, taxpayers that are not direct victims of identity theft can be indirect victims with the delayed issuance of their income tax refunds.
If you are in need of assistance with an identity theft matter, please contact Neil Becourtney, Partner, at 732-380-8678.
Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.
This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.