My First Client on Identity Theft

[S T]

I was just notified by a client they suspect their IRS return is part of the identity theft. Should be a married joint return, however, as far as we know only targeted the husband.

Seems strange to me on this particular client, but then I have not experienced identity theft on behalf of my clients.

I am in the process of completing their 2014 returns, and have not yet electronically or paper filed.

Husband's employer notified him that he was potentially at risk for identity theft on at least his Federal return and then handed him a check from the Dept of Treasury for a refund in his name only which was processed on 2/17/2014. Amount is rather large $ 6,611. Employer stated that they had received several of these checks which also affected some of the taxpayer's co-workers.

Also in the mail on was a CP53 letter notice from IRS, stating that they "did not direct deposit the refund as requested, and a check would be mailed".

What seems odd to me about this situation is that the return was processed only in the husband's name, and the address used on the check is the Employer's address.

Obviously the taxpayer has to contact IRS and submit all of the proper documentation for identity theft, as well as return the "erroneous check",

Question I have now is whether to attempt/bother to try to electronic file the return so we can obtain the reject notice to add to the documentation that will be submitted to IRS, or just prepare the documentation and then paper file the return.

Thanks

Sandy

[kathyc2]

If I'm following this correctly, several employees of the same business had fraudulent returns filed under their name, and the crook used a bank account that was not valid?

Unless it's a very large company, it sounds the SS/name info may have come from the employer data being compromised?

You could use 6C Other on 8948 with a description of what happened to not e-file.

[S T]

Thanks KathyC,

Yes it does appear to be a "breach" of employee data either at the Employer level, or the Payroll Processing level, if more than one employee is involved, and the Employer's Business address is involved.

I understand the 8948 and filing a paper copy, my question was since either I or the taxpayer does not have an alert/notice from IRS on possible identity theft, or an electronic rejection, whether I needed to try to accomplish that, to add to the documentation to be filed with IRS. We only have a Direct deposit notice changing to a papercheck, which has been received - delivered to the Employer's address in the name of the employee/taxpayer.

I also have another question, to file the form 14039 for not only the husband, but also the spouse as they file a joint return. Seems we would need the ID PIN #'s for future???

Thanks for any guidance on this

Sandy

[tpnl]

Local IRS

Do you have a local IRS office close? I would send the taxpayer there to get a printout of what was filed under his SSN. Maybe there might be some tidbit of information on it to determine who filed the return.

We have a handful of clients that have identity theft issues. Next year, your client will be issued a identity PIN. Those are typically mailed out in December.

I hope your client is not due a refund. One of our identity issue clients didn't get their refund last year until October, the return was filed in January.

Good luck.

[JohnH]

Thanks KathyC,

Yes it does appear to be a "breach" of employee data either at the Employer level, or the Payroll Processing level, if more than one employee is involved, and the Employer's Business address is involved.

I understand the 8948 and filing a paper copy, my question was since either I or the taxpayer does not have an alert/notice from IRS on possible identity theft, or an electronic rejection, whether I needed to try to accomplish that, to add to the documentation to be filed with IRS. We only have a Direct deposit notice changing to a papercheck, which has been received - delivered to the Employer's address in the name of the employee/taxpayer.

I also have another question, to file the form 14039 for not only the husband, but also the spouse as they file a joint return. Seems we would need the ID PIN #'s for future???

Thanks for any guidance on this

Sandy

Sandy:
I've just been looking into this myself, and I had the same question - one or both?
I think you should file the 14039 for both the husband and the wife.
I can find no downside to getting two ID Theft PINS.

[manyhappyreturns]

The IRS may not issue the TP an ID Protection PIN# unless you make an attempt to efile it and receive a reject notice. Some of the employees in the fraud dept don't consider a person a victim until they see the concrete evidence of their return being filed fraudulently by another person. They are inconsistent about issuing the PINs -- some get them, some don't -- probably just depending on who is handling the case, but if the TP wants a PIN# next year for protection, and if you want further validation for not efiling, it's a good idea to efile it, even if you know it will be rejected.

[JohnH]

I'm filing for PINS for my wife and for me based on a lost/stolen purse (my wife's, just to be clear).

The reason I'm giving for issuing a PIN to both of us is that we were traveling at the time and her purse contained her passport, copy of my passport, and copies of both our Medicare cards which have Social security numbers on them). I'll report back on what happens and how long it takes. But I'll have to say that if we are rejected, I'm submitting another application.

[Lion]

As an IRS pilot program, residents of a very few states (FL, GA, & DC?) can get PINs proactively. I know preparers in other states are telling their clients to apply also. It's worth a try.

[JohnH]

They need to expand that program, but they have a problem.
It exposes the flaws in the current system and makes them look like fools.
I expect they reject a few on a whim, just to give the impression that they're actually doing something.
It also prevents their being overwhelmed with applications.

I think IRS should automatically approve ID Theft PIN applications for any tax preparer who was in business prior to 1999, when they first introduced the PTIN. For any of us who were preparing tax returns prior to that time, there are thousands of paper returns sitting in client's storage boxes, file cabinets, loan applications, etc with our Social Security numbers on them. All it takes is one smart thief buying the right stuff at an estate sale to get your SS#, and then he's on his way.

[S T]

Thanks for all of the replies -
Here is what the Taxpayer and I have done so far - I believe it is the most pro-active that can be done.

Taxpayer went to the local IRS office - I had completed the 14039 form for taxpayer and taxpayer spouse, which he took with, along with the bogus refund check for $6,611, and a copy of the IRS notice that stated direct deposit was denied due to bank verification or reject

IRS office would only accept the Taxpayer form 14039, as he was present (spouse was not) to present Identification verification, stated spouse did not need to file one, however, I disagree with that as they file a marrried joint return.

I completed return and obtained all of the 8879 forms, etc, taxpayer has checked with bank for direct deposit and placed a "fraud alert" - electronic filed "only the Federal - and of course a "reject" which I now have in file.

This particular incident seems to stem at the Employer level or at the Payroll Processing level, IRS agreed with this fact pattern, when submitting the documents - form 14039. There are approximately 70-80 employees, and as known as of this date approximately 30-40 employees are victims.

So moving forward, we are paper filing the Federal return, I will attach the reject efile notice, along with the Spouse's form 14039 - as a potential victim, as well as the taxpayer (husband's IRS received stamped form 14039)

Next order of business is to obtain the IP Pin # - not exactly sure on that procedure, a colleague said you can apply online. As a precaution, we are also filing the identity theft or potential with the State, and will try to efile that return

What a process!

Seriously considering to advise all of my clients to file for this IP Pin # and now looking at a POA on each and every client as well that has been a long term client.

Any other thoughts or guidance would be welcomed!

Sandy

[manyhappyreturns]

If the primary taxpayer has a PIN and they are filing a joint return, then the spouse doesn't really need one, so they say. I have filed 3 like that and they went through. If they split up and the spouse tries to file on her own, then she may need one.

Unfortunately I have a lot of experience with the 14039/PIN# routine. To be issued a PIN# in the first place, you are required to have had an identifiable event that the IRS (in particular, the person who ends up with your 14039 report, so it's kind of random) considers risky enough that you need a PIN to file your tax return. Having your name and SSN on a list that has been exposed to a crook who has already used some of the other names on the list to file a fraudulent tax return is not generally considered a big enough event to be issued a PIN, although I don't understand why not?!?!?!

The process of getting a PIN is first filing Form 14039, then waiting till you get a letter from the IRS which can be one of 3 different letters: (1) A letter giving the TP or both the TP and SP a PIN#, (2) a letter telling you that you are eligible for a PIN, but do not have to choose to get one, and the letter gives a website (which is most of the time busted) where you can apply for a PIN online, or (3) a letter saying you do not need a PIN and you need to file your tax return like normal.

I had a client whose tax return was rejected because a crook had already filed his, and he received letter #3, but when we efiled his return, it was rejected because he hadn't entered his PIN. Go figure. It took us 3 days of phone calls to the IRS to get him a PIN, but we got it and I efiled it and it went through finally. So apparently good wins over evil in the end.

[S T]

Many happy returns, Thanks for your feedback and experience. One would think this could be easier for the Taxpayer/Spouse to accomplish and even theTax Preparer, but I guess that opens all up to more ID theft.

Just should not be this difficult and frustrating - but can work on over the summer for year 2015 for these clients, and possible other clients.

not sure I understand this statement

Unfortunately I have a lot of experience with the 14039/PIN# routine. To be issued a PIN# in the first place, you are required to have had an identifiable event that the IRS (in particular, the person who ends up with your 14039 report, so it's kind of random) considers risky enough that you need a PIN to file your tax return. Having your name and SSN on a list that has been exposed to a crook who has already used some of the other names on the list to file a fraudulent tax return is not generally considered a big enough event to be issued a PIN, although I don't understand why not?!?!?!

Example in this case, Taxpayer and Spouse do not have an identifiable event, receiving a refund check that is erroneous and does not belong to them, the Taxpayer's workplace already has approx 30-40 other employees that are affected by this crime, and I try to file the Federal return, and receive a "reject" notice. Really, that might not be an identifable event! - No, No - this is an identifable event, and someone at IRS needs to recognize it and issue some IP/ID protection codes.

Maybe if enough "honest" and "diligent" tax professionals, just start requesting these IP/ID # and filing in POA's on our clients -------??????.

Sandy

[mastertaxguy]

Poa with identity theft?

1. We started seeing this a few years ago.
2. Up until this year, every time we had a ID theft client situation we obtained POA forms (federal and state, and for both souses on joint returns and any adult children claimed as dependents) for the prior two years, year in question, and current year. The theory was that we would be able to talk with IRS or State tax authorities when needed. That aspect has not proven to be frequent or for the most part necessary.
3. This year, we decided not to obtain POA forms for those first time ID theft clients. No particular reason and no prior "problems" with the POA's. Just something we decided not to do.
4. Which sparked some conversation yesterday around our offices: Should we get POA forms from clients in these ID theft cases? And of course, what are other practitioners (those like YOU who are reading this) doing in this regard, if anything?
5. We have noticed this year an increasing number of ID theft "situations" where the TP has been claimed as a dependent, even though they are adults and make >$15,000.00 on W-2's.
6. We do our best not to get personally involved with the taxpayer(s) and IRS or other taxing authorities on this type of issue. We felt the POA's were a good idea in case other tax related issues involving the return(s) we prepared came up. Keep in mind the ID theft is NOT OUR PROBLEM.
7. Our observation is that more often than not, the ID theft results from someone the TP knows, lived with, works or worked with, or the payroll company/person where the TP's work(ed).
Thank you.

[DonB]

Unfortunately I have a lot of experience with the 14039/PIN# routine.

To Manyhappyreturns: Did you ever discover the source of your client's ID theft?