June 2011

A Warning about Tax–Related Identity Theft
Written by: Karen Reed, EA

Tax related identity theft involves the practice of using stolen social security numbers to obtain employment or tax refunds. In 2010, there were 248,357 cases of this type of fraud reported by the Government Accountability Office, almost a five–fold increase over the number of cases reported in 2008. In response to the unexpected growth, the IRS is upgrading safeguards for e–filers as well as the customer services it provides to victims.

Although the staff has doubled in the special IRS unit dedicated to assisting taxpayers facing identity theft, the tax issues created by these situations are difficult for fraud victims to resolve. At a recent House hearing on identity theft, IRS Commissioner Doug Schulman apologized personally to victims who testified that they were treated rudely by agency personnel. He said the training for telephone representatives is being reviewed as a first step in addressing the problem.

Besides safeguarding your social security number, there is little you can do to prevent tax–related identity theft. You should be alert to the possibility of an identity theft if you receive a letter from the IRS indicating that more than one tax return was filed for you, or that you received wages from an employer that is unknown to you.

If you believe you have been a victim of tax–related identity theft, contact the IRS Identity Protection Specialized Unit at 800–908–4490 for guidance on how to resolve your issue. You may be required to prove your identity by providing copies of your driver license or passport, along with a police report or IRS Identity Theft Affidavit (Form 14039).

This information is being provided to the taxpayer as required by the Internal Revenue Service and follows the guidelines for best practices for tax advisors per Circular 230 §10.33(a)(1–4), and § 10.35(b)(2), (8), and (10). As by definition, this written statement may be considered to be a “covered opinion” as defined by the Internal Revenue Service. This statement(s), along with subsequent correspondences, is not intended or written to be used, and cannot be used by the taxpayer, for the purpose of avoiding lawful penalties that may be imposed on the taxpayer by the Internal Revenue Service. The principal purpose of any stated tax advice included here has as its purpose to claim tax benefits in a manner consistent with the statutes and Congressional intent.