Identity Theft & EF

[Burke]

For the third time this week, I have had a client mention identity theft and electronic filing in the same sentence. There was "some program" on the news "somewhere" about this and "people were talking" about it. Now they don't want to efile. I just got off the phone with a client in SC, where apparently there WAS a big issue with direct deposit refunds. He says it was someone in the SC Dept of Revenue, and that they caught him sending bank acct info overseas. The client had to close his account. Could this be the issue the other clients were referring to?

[Koss]

E-file Security Concerns

There was a massive data breach discovered by the South Carolina Department of Revenue last year.

I don't think it was intentional fraud by a state employee. It was definitely very serious. But I think your client is getting the facts garbled. As usual, there is a grain of truth to what you were told. Based on what I have read, it appears that the DOR's database was hacked, and bank account information and other data, such as social security numbers, was compromised. There may have been some evidence that the hacker was in another country.

This isn't news. This happened last year. Here's a couple of links to information from the South Carolina Department of Revenue:

http://www.sctax.org/security.htm

http://www.sctax.org/NR/rdonlyres/E5A231EF-8A05-40FE-AA36-17453FF2C795/0/notice_protectYourselfMarch.pdf

Having said that, I'm in Ohio, and just today I had a client ask me if my office would be transmitting her tax data "directly to the IRS."

I answered truthfully. The answer is no. I explained that our e-file system sends data through an intermediary, and that the process begins with a transmission from our office to our software vendor. I went on to explain that electronic filing is a bit like credit card processing. I told the client that there are only about a dozen companies that have direct access to the IRS computer system. Everyone else goes through one of them.

My client accepted this explanation, and we e-filed the return. But she remarked that she had heard something about some concerns over the security of taxpayer data while it is in the hands of such "intermediaries."

At that point, the conversation moved in another direction.

The intermediaries, or e-file transmitters, are those who are subject to the fairly stringent data security requirements of the IRS. Among other things, they are required to use government-grade encryption. I have not heard about any kind of data breach involving the federal e-file process itself.

But there must have been something in media to get people talking...

It doesn't mean anything actually happened. It might have been some talk show chatter about how you have to be careful with your tax data, and "make sure you know who has access to it after you leave the tax office," or "ask how they protect your information." Or something like that...

BMK

[Burke]

This isn't news. This happened last year.
But there must have been something in media to get people talking...
It doesn't mean anything actually happened. It might have been some talk show chatter about how you have to be careful with your tax data, and "make sure you know who has access to it after you leave the tax office," or "ask how they protect your information." Or something like that...BMK

This time of year, anything related to tax filing is "news" to the media. Or an excuse to give advice, dredge up horror stories, and on and on. Somehow clients have related identity theft and efiling together in the same vein. And with hackers getting more and more sophisticated, it may have some credence. But I don't see us going back to paper-filing at this point. And that has its own drawbacks and security concerns. So we keep on, keeping on...... and my client is NOT doing direct-deposit in SC this year.

[mastertaxguy]

Id theft issues

Today's (Feb. 27, 2014) Detroit Free Press (www.freep.com) has an article by Susan Tompor on its business page regarding ID theft and fake tax returns. By pushing e-filing and "free filing" one might wonder if IRS is really promoting "fraud filing."

[mastertaxguy]

Identity theft-irs 'pre-emptive letter'?

Anyone have (or had) clients/taxpayers who have received a letter (LTR 4464C) from IRS (Austin Center?) concerning their tax return being pulled for review BEFORE THEY FILED THEIR 2013 TAX RETURN?

Office I am at this year has had 5 "alleged" ID theft situations (about 1% of all returns to date). Latest was a couple whose 2013 taxes were done on a Friday, transmitted and rejected on the next day (Saturday), and on following Monday they (he actually) received a letter from IRS (Austin) listed as letter LTR 4464C and dated 3 days before their appointment with us. Letter says their return is getting a "thorough review of your return information. This review is part of an ongoing program the IRS conducts to ensure the accuracy of return information." Letter was mailed to their home. Letter does not include a copy of the return or indicate a filing status, and no such letter was sent to the wife ("traditional marriage"). Letter goes on to list 4 items being reviewed. A fair conclusion is that someone filed a return in H's name with some schedule C items and/or high withholding. This appears to be an ID Theft issue.

(Yes, ID Theft Affidavit form 14039 was prepared and filed with paper copy of return mailed to the applicable processing center; also 14039 for the wife).

Curious to know if others have had clients with simliar letters. I know there are IRS agents/RO's/etc reading this forum, and hope thay might break tradition and actually respond with some useful information on this.

BTW, we also have had two different clients, one new, one returning, with altered W-2's: B copy withholding was altered but not the other copies (1, 2, C etc). One was an ADP prepared W-2, other prepared by the employer (legit employers both).

[manyhappyreturns]

Anyone have (or had) clients/taxpayers who have received a letter (LTR 4464C) from IRS (Austin Center?) concerning their tax return being pulled for review BEFORE THEY FILED THEIR 2013 TAX RETURN?

Office I am at this year has had 5 "alleged" ID theft situations (about 1% of all returns to date). Latest was a couple whose 2013 taxes were done on a Friday, transmitted and rejected on the next day (Saturday), and on following Monday they (he actually) received a letter from IRS (Austin) listed as letter LTR 4464C and dated 3 days before their appointment with us. Letter says their return is getting a "thorough review of your return information. This review is part of an ongoing program the IRS conducts to ensure the accuracy of return information." Letter was mailed to their home. Letter does not include a copy of the return or indicate a filing status, and no such letter was sent to the wife ("traditional marriage"). Letter goes on to list 4 items being reviewed. A fair conclusion is that someone filed a return in H's name with some schedule C items and/or high withholding. This appears to be an ID Theft issue.

(Yes, ID Theft Affidavit form 14039 was prepared and filed with paper copy of return mailed to the applicable processing center; also 14039 for the wife).

Curious to know if others have had clients with simliar letters. I know there are IRS agents/RO's/etc reading this forum, and hope thay might break tradition and actually respond with some useful information on this.

BTW, we also have had two different clients, one new, one returning, with altered W-2's: B copy withholding was altered but not the other copies (1, 2, C etc). One was an ADP prepared W-2, other prepared by the employer (legit employers both).

I had one client receive one of these letters, and even received one myself. I had several rejected returns this year due to return already filed, and most of them were because somebody filed a fraudulent return using their names & SSNs and received rather large refunds of $8 or 9K. I know this because I called up some transcripts of clients BEFORE they rejected. Once it rejects, you can't get the transcript anymore, at least so it seems.

I was actually encouraged to have received the letter regarding my own tax return, because it showed that the IRS at least noticed something not quite right. My hubby and I are both self-employed and have been paying ES tax, then all of a sudden I suppose a tax return showed up with large amounts of wages and withholdings. There are a lot of red flags that seem to bypass the IRS computers, so I was glad to see they noticed that one.

The other client of mine who got such a letter is 72 years old and has had nothing but SSA and a small pension since she was 65 and that must have raised a red flag. But interestingly enough, I had another couple over 70 and a single lady who is 77 who had similar situations, but when I called up their transcripts, it showed high wages and high withholdings, and subsequently huge refunds on both of them. Now what 77 year old lady is going to go out and make $89K all of a sudden after 12 years of SSA and retirement income? She only had about $900 of withholdings, but the refund the crook got was over $8K. Seems like the IRS computers should be able to catch something like that.

It also seems like the IRS shouldn't be sending out large amounts of money that theoretically doesn't exist. I mean, refunds should not be larger than the amount in the withholding pocket for each TP unless they have refundable credits. This is a gross misappropriation of taxpayer funds and I seem to be powerless to stop it.

[veritas]

we

Had one client rejected because of fraud. He was estatic sine he had a balance owing from a previous year.

[manyhappyreturns]

Had one client rejected because of fraud. He was estatic since he had a balance owing from a previous year.

Yeah, that's a case of a TP getting his debt to the IRS paid by the IRS, at least temporarily. I'm sure the penalties and interest still accrue in the meantime. That's one of those "it was fun while it lasted" things.