The IRS Security Summit (Summit) urges the tax community to learn the tell-tale signs of identity theft. The Summit consists of state tax agencies, tax preparation firms, software developers, payroll and tax financial product processors, tax organizations, and financial institutions. The Summit urges taxpayers and tax professionals to immediately contact the IRS, insurance or cybersecurity experts when dealing with identity theft issues.
Some of the tell-tale signs tax professionals should be aware of include: rejection of electronically-filed tax returns because the taxpayer’s social security number has already been used on another return; receipt of more than one electronic confirmation that a return was filed; clients responding to correspondence, which the tax practitioners did not initiate; and slow or delayed network responsiveness. Tax professionals should be mindful of these signs of identity theft and advise their clients properly.
Other suspicious indicators of identity theft include: receipt of communications or payments from the IRS without filing any returns; receipt of tax transcripts that the taxpayer did not request; unsolicited emails or phone calls from tax professionals; or notices that someone created, assessed or disabled the taxpayer IRS online account. Tax professionals must exercise due diligence when taxpayers receive authentication letters because responding to these will corroborate that the IRS is dealing with the taxpayer, and not an identity thief.
If a tax professional suspects an incident of identity theft, it is crucial to take immediate action. The Summit recommends contacting the local IRS Stakeholder Liaison immediately. The Liaison will contact the IRS Criminal Investigation on behalf of the tax practitioners to block any fraudulent returns.
Unemployment benefits theft
One area that has experienced a surge in fraud and identity theft is unemployment benefits. Criminals are using stolen identities to file and collect unemployment benefits.
Taxpayers should recognize certain red flags that they might be a victim of unemployment fraud. For example, they may receive communications from a state agency about unemployment claims or benefits when they have not filed for benefits. Taxpayers might notice their Form 1099-G reflects an unemployment benefit amount that does not match the taxpayer’s records. In some cases, a taxpayer’s employer might receive requests for information pertaining to unemployment benefits while the taxpayer is still is employed.
For victims of unemployment benefits identity theft, the IRS recommends that taxpayers proceed with filing a return, even though the fraud is under investigation. The IRS suggests victims of unemployment benefits theft register for the IRS Identity Protection PIN program, which generates a six-digit number that prevent criminals from filing tax returns using the taxpayer’s identity.
Employers should act swiftly to notices that their employees have filed unemployment claims. Employers should file Form 14039-B, Business Identity Theft Affidavit, if their employer identification number (EIN) is used to file fraudulent unemployment benefit claims. The IRS recommends that the employers close out any business tax account with the IRS whenever the business has terminated to thwart misuse of EINs.
As reports of identity theft surge, taxpayers and tax professionals need to be cognizant of the warning signs to prevent criminals from stealing their information. If you have any questions, please contact a member of RSM’s Tax Controversy Team.