If you’ve received an unexpected IRS letter or your e-file tax return has been rejected, there’s a possibility you’re a victim of identity theft.
Identity tax theft can be very frustrating and confusing; in most cases, criminals use your Social Security number and personal information in an attempt to steal your tax refund.
The IRS is aware of the fraudulent tax returns and has a system that flags your tax account for additional review when they detect anything suspicious. However, in the instances where they don’t notice it, you’ve got to be proactive and report it to protect your tax refund and ensure you don’t pay for a tax balance you don’t owe.
In this guide, we will discuss how to recover from tax-related identity theft and protect yourself in the future. If the fraudulent tax return ends up complicating your tax compliance, feel free to reach out to us, and we will help get you back on track.
Key Takeaways
- Tax identity theft – This is the unauthorized use of your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN) to file a fraudulent tax return.
- Signs you might be a victim of tax ID theft – The IRS rejects your e-filed tax return, you receive a tax transcript you didn’t request, or unexpected IRS notices.
- How to fix a fraudulent tax return: File Form 14039
- IRS IP PIN – A six-digit number assigned to taxpayers to help prevent tax identity theft
- How long does tax identity theft resolution take: 20-24 months
What Is Tax Identity Theft?
Tax identity theft occurs when someone else uses your tax information (usually your Social Security number) to file a falsified tax return. In most cases, criminals do this to steal your tax refund.
Tax ID theft can cause disruptions for your tax filings and delay the processing of your tax refund. You can reduce the time it takes to resolve tax identity theft by acting fast.
How To Recognize the Signs of Tax ID Theft
One of the most common signs of tax identity theft is the rejection of your legitimate e-filed tax return. This happens because someone else already filed one using your SSN. After rejecting your tax return submission, the IRS mails you a notice letting you know a return has already been filed using your SSN or ITIN.
Other warning signs that you may be a victim of tax identity theft include:
- Receiving a 1099, or W-2 tax form, from an employer you never worked for.
- Notices from the IRS claiming you owe more in taxes, your refund was offset for a balance due, or collection actions have been initiated for a tax year you didn’t even file a return or earn any income.
- Notices from a tax preparation software company about an account in your name that you didn’t sign up for.
- Receiving IRS transcripts in the mail that you didn’t request.
- Learning about an employer identification number (EIN) you never applied for.
- Receiving emails or text messages about an unknown password reset request or login verification.
- You receive an IRS notification that your online tax account has been disabled or accessed, and you didn’t authorize it.
- Reviewing your IRS tax transcript and noticing irregular or unfamiliar entries.
Another sign you may be a victim of tax identity theft is receiving an IRS notice related to tax theft.
There are several IRS notices that could indicate that someone has, or is about to, file a tax return using your name. Here’s a snapshot of the IRS identity theft notices, what they mean, and what to do when you receive them:
| IRS Identity Theft-Related Notices and Letters | ||
|---|---|---|
| Notice / Letter | What It Means | What You Can Do |
| CP01E | The IRS detected that your SSN may have been used to obtain employment. | Carefully review your credit report for signs of identity misuse. |
| LTR 5071C | Someone may have used your SSN or ITIN to file a federal income tax return. | Verify whether you filed the return. If you did not, notify the IRS immediately, as you may be a victim of identity theft. |
| LTR 4883C | The IRS needs additional information to verify your identity before processing your tax return. | Call the IRS with your prior-year return, current return, W-2s, 1099s, Schedule C, and any requested supporting documents. |
| LTR 5747C | The IRS needs to verify your identity because someone may have filed a return using your SSN or ITIN. | If you filed the return, schedule an in-person appointment with the IRS. If you did not, contact the Taxpayer Protection Program immediately. |
| CP2000 Series | The income reported on your tax return doesn’t match information the IRS received from third parties. | Review the proposed changes and respond by following the notice instructions. If identity theft caused the discrepancy, notify the IRS. |
What To Do After Discovering a Fraudulent Tax Return Filing
If someone files a fraudulent tax return using your name, the first thing you should do is file IRS Form 14039, Identity Theft Affidavit with the IRS.
IRS Form 14039, Identity Theft Affidavit
This IRS form is relatively straightforward to complete, so you don’t normally need to hire a tax professional to help you with it. You can fill it out and either mail or fax it to the IRS, or you can complete it online. The primary purpose of this form is to:
- Tell the IRS that you or someone close to you (like a spouse or dependent) may be the victim of tax identity theft;
- How the stolen identity relates to the victim’s taxes, and
- The tax years that may have been affected.
A few things to note about Form 14039 before you file it with the IRS:
- Don’t file it if the IRS already knows about the ID theft and sent you a letter or notice notifying you of the theft.
- Form 14039 is only needed for tax-related ID theft.
- You won’t use this form if you’re a business, trust, estate, or tax-exempt organization.
- Generally speaking, you’ll use this form if the IRS isn’t aware of the tax ID theft, the IRS explicitly tells you to, or you’re trying to verify your tax return and can’t use the IRS’s Identity and Tax Return Verification Service.
- If you need to attach additional documentation, only send copies, not originals.
After submitting Form 14039, you’ll need to be patient. It may take the IRS several months just to process this form, then another several months to a year to clear your tax file. You can opt to work with a tax professional to ensure you don’t have to wait longer than you have to.
Take Additional Steps to Identity Recovery
In addition to submitting Form 14039 to the IRS, you may also want to consider:
- Checking your credit report with one of the major credit reporting bureaus (Experian, TransUnion, or Equifax).
- Placing a fraud alert on your credit report.
- Reporting the identity theft to the FTC.
- Contact any businesses where you think your identity may have been stolen.
- Filing a stolen identity police report.
- Requesting an IRS IP PIN.
Obtain an IRS IP PIN
An IRS identity protection (IP) personal identification number (PIN) is a six-digit number that prevents someone else from filing a tax return using your Social Security number (SSN) or individual taxpayer identification number (ITIN).
As of 2021, anyone can request an IP PIN, even if they aren’t a victim of tax ID theft. Parents and legal guardians can also request an IP PIN for dependents.
You can request an IP PIN for free through your online tax account.
Why It’s Important to Fix the Tax Filing Fraud Quickly
The moment you learn someone may have filed a tax return without your permission (or the IRS suspects you’re a tax ID theft victim), you should act quickly to let the IRS know and remove incorrect tax information from your file. Any delays could lead to:
- Tax assessments and unpaid tax collection efforts by the IRS.
- Assessed penalties for taxes you don’t owe.
- Delayed, reduced, or eliminated tax refund checks.
- Delays processing tax returns you actually filed.
If a stolen tax identity goes unaddressed for too long, you might be forced to deal with aggressive collection activities from the IRS, such as tax liens, bank levies, and wage garnishment for a tax balance you don’t owe. If you’re already facing this, contact a tax professional for help on the best steps to take to prevent more problems with the IRS.
Still Need Help Fixing Tax Identity Theft?
In many cases, you can resolve tax identity theft on your own by acting quickly at the first sign of suspicious activity. But even then, some instances of tax identity theft could result in tax problems that require professional help. For example, if the IRS is already threatening wage garnishment for a tax balance that resulted from a fraudulent tax return, you could use an extra hand.
If the fraudulent returns have created more issues than filing Form 14039, we can help fix the problem and get you the best possible outcome.
Schedule a consultation online, or if you’re more of a phone person, reach us at (404) 609-1300.
Frequently Asked Questions (FAQs)
Here are the top questions we get on the IRS ID theft:
What happens to my real tax return if someone filed taxes using my SSN before me?
The IRS will reject your tax return if it has already received one using your SSN; it’s not possible to submit two tax returns for the same year. In some cases, the IRS Taxpayer Protection Program will identify the fraudulently filed tax return before you file yours. If this happens, the IRS will send you a letter letting you know and asking you to verify your tax information.
Do I need a tax lawyer to file IRS Form 14039?
You don’t need to hire a lawyer to file Form 14039. But you might need one if there are other tax issues stemming from the fraudulently filed tax return, such as IRS collection activities for a tax balance you don’t owe.
How much does an IP PIN cost, and who can get one?
It’s free; you only need to request one through your online tax account. It’s available to anyone with a tax identification number. It’s valid for 12 months, and it removes the possibility of anyone else filing a tax return on your behalf. As of 2021, even taxpayers who aren’t victims of tax ID theft can apply for one.
Can I still get my tax refund if the identity thief already stole it?
Yes, but you’ll need to be patient as the whole process of clearing things up and getting your refund can take a long time. It can take anywhere from 20-24 months or more for the IRS to investigate the fraudulent tax return and process your refund.
Is it identity theft if a tax preparer lies on my return?
No, but it’s still a problem. You’re responsible for the details on your return, but if your tax preparer lied, you may be able to hold them liable through a civil court claim. You may also be able to get relief from certain penalties if you explain that you acted in good faith but were tricked by an unscrupulous or ghost preparer.
How long will it take for the IRS to resolve my tax identity theft case?
It could take up to several years for the IRS to resolve your Identity Theft Victim Assistance case. Realistically, assume a 20-24 month timeframe before things are resolved.
Can the IRS try to collect taxes owed on a return I didn’t file?
Yes, unless you inform the IRS of the identity theft, the agency will assume the fraudulent tax return is valid and pursue the tax debt as any other tax debt. This is why it’s important to contact the IRS as soon as you realize you’re a victim of tax ID theft. Otherwise, you are at risk of collection actions including wage garnishment, bank levies, tax liens, etc.
Sources
- https://www.irs.gov/individuals/how-irs-id-theft-victim-assistance-works
- https://www.irs.gov/identity-theft-central/identity-theft-guide-for-individuals
- https://www.taxpayeradvocate.irs.gov/news/nta-blog/identity-theft-victims-are-waiting-nearly-two-years-to-receive-their-tax-refunds/2024/06/
- https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
- https://www.irs.gov/pub/irs-pdf/p5027.pdf
- https://consumer.ftc.gov/articles/what-know-about-tax-identity-theft
