IDENTITY THEFT AND THE IRS

An identity thief may bring you troubles with the IRS by using your social security number to file a false tax return or to use it to work. If the thief uses it to work, the IRS might suppose the wages are yours and request you to pay taxes on those wages.

Put Kevin’s situation into consideration…

Kevin lived in Iowa his entire life. He went off to college and had a roommate. It turned out Kevin’s roommate wasn’t so great. Kevin’s roommate moved out before time. Kevin ended up paying the roommate’s share of rent on top of his own as well as all the utility bills. Last Kevin heard his roommate was heading to Las Vegas to try his luck at Black Jack.

After two years, Kevin receives a notification in the mail that he has not claimed $10,000 in gambling winnings from 2019. In addition, Kevin learns his former roommate has been working as a waiter at a casino in Nevada and hasn’t claimed tips or wages of $40,000.  The hitch is Kevin has never stepped foot in Nevada. He was a full-time student and received minimum wage working on campus for 15 hours a week.

Kevin submitted his tax return claiming his wages and got a small reimbursement. The Internal Revenue Service says Kevin owes over $6,500 in taxes and penalties for that year. Kevin starts to suspect his former roommate is using his social security number and name in Las Vegas. Kevin had a filing cabinet for his documents but realizes he left it unlocked most of the time. His roommate could have seen his past returns and information.

What should a taxpayer in Kevin’s shoes do?

First, Kevin should go to IRS.gov and print a form 14039. It asks taxpayers to check one of three boxes.

1.   I am a victim of identity theft and I believe this incident is affecting my tax records (Provide a short explanation of the tax impact)
2.   I am a victim of identity theft and believe I may be at risk for future impact to my tax account
3.   I am a potential victim of identity theft and believe I may be at risk for future impact to my tax account.

Usually, if the taxpayer has received an IRS notice indicating the taxpayer has income that is not his or hers and this income is reported under the taxpayer’s name and/ or social security number the taxpayer is a victim of identity theft. Then the first box will be the most suitable to confirm.

The second box is to be used if the taxpayer knows his or her identity has been stolen and thinks there is a possibility the person might use the stolen identity for work or tax reasons.

The third box is available when the taxpayer wants to give the IRS a “heads up” but hasn’t found any unauthorized use of personal information. This might be suitable where a social security card is either lost or stolen but the person isn’t certain which.

 

Secondly, taxpayers will be asked to give details about:

• Current address,
• What tax years may be impacted,
• Address used on the last return filed and
• Contact information.

In addition, the taxpayer will be asked to make available a photocopy of proof of identity such as a driver’s license, passport, social security card or other federal identification that can be legally photocopied. In Kevin’s case, the IRS has sent a notice. The form 14039 should be sent back to the address listed in the notice for correspondence. Kevin should make sure to check the box on the IRS notice that says that he does not agree with the proposed change to his taxes.

 

The IRS should contact Kevin in response to this form. If the IRS does not call or write, Kevin should call the IRS to make sure they are taking the information into account. The IRS may ask for additional proof such as a police report or proof that Kevin did not live or work in the other state or at the other job. Evidence that Kevin was a full-time student in Iowa, a copy of his lease, and a letter from his employer should all be useful. In Iowa, Kevin has a right to file a report with the local police. Kevin should do this and keep a copy for his records.

 

The IRS is supposed to put a marker on a taxpayer’s account in response to a form 14039. If any unreported income shows up either currently or in the future, the IRS should do extra checking before assuming the income is truly the taxpayers. While this is the way it is supposed to work, taxpayers should not assume that turning in the form is the only response that will be required.

Victims of identity theft should be cautious to open any mail from the IRS, review social security earnings statements each year to make sure earnings look correct, and challenge any proposed action by the IRS that the taxpayer thinks is incorrect.

How IRS Form 5071C can help your identity

While the Internal Revenue Service may not be everyone’s best friend, there are times when you can be happy that they are watching. 

The probability of the IRS contacting you increases as the rate of identity theft continues to increase. You can receive a 5071C form by mail. This is an attempt by the IRS to notify you that a tax return has been filed for you and that the agency wants to verify that you have filed it.

It is essential to review the information and take action immediately if you receive this notice because its aim is to verify your identity and protect you, not to take any more money from you. 

5071C Form

The 5071C IRS form is an IRS communication that requests additional information about your identity. The IRS is ensuring that you are the individual who filed a tax return. Victims of social security identity theft may be familiar with the form, because it is often the first warning a victim of tax fraud receives that someone has stolen their identity.

You will normally receive this letter if the IRS has received a federal income tax return with your name or social income number associated with it. The IRS picked up one or more statements that made you suspect that it could not have been you who filed a return and that you are looking forward to a refund. The form requests some identifying information and wants to confirm that you sent the IRS tax return.