IRS Letter 5071C - Identity Verfication

[S T]

As a professional preparer of a client's tax return, have you been notified by a client, that they received IRS Letter 5071C - Identity Verification Service?

A long time client just sent over a copy of the letter notification, (first time I have seen this letter notice) the electronic file was accepted, acknowledged and confirmed on 10/12/2015 - involves the h/w taxpayer and then also a dependent daughter's return - letter notice was received on both accounts.

Letter states taxpayer can verify online at idverify.irs.gov website, I confirmed that from the IRS website.

My questions -

why did the taxpayer and taxpayer's dependent receive this letter when both returns cleared electronic file? Is it that the taxpayer's account at IRS might be compromised?

Might it be the letter was generated due to compromise on the online-transcripts that was shut down?

Would it be the EFIN - my preparer # that is compromised

I can sign on with POA, however, they encourage the taxpayer to be present as well - POA it will take 5 -7 days to record and I probably will not be able to answer some of the questions online or phone as notation for verification service states it will use "non-governmental information" that only the taxpayer is likely to know - guessing credit records?

If possible- if anyone on this board has encountered this, I would welcome feedback, before I provide an outline to the tax client. We all know how stressed the Tax Clients become when receiving notices from the IRS - and now in particular with the Identity Verifications and/or Identity Theft on the IRS accounts.

Also considering to suggest that this taxpayer apply for their IRS identity Protection Pin for year 2015

Will welcome any suggestions and feedback

Thanks for your thoughts and time,

Sandy

[David1980]

why did the taxpayer and taxpayer's dependent receive this letter when both returns cleared electronic file? Is it that the taxpayer's account at IRS might be compromised?

The question being why wouldn't they just reject the tax return rather than accept the tax return and then issue the letter? The rejects are all based on something simple to check, like the name control matching the SSN or that sort of thing. Mainly checking specific calculations but not considering the overall return or other identity theft indicators such as significant changes from one year to the next. No doubt for the 5071C they're using some more complicated algorithm to calculate a score of some sort to determine who to send letters to.

I get the same kind of questions from taxpayers on CP2000 and the such. Why would they send me a CP2000 when the return cleared electronic file? The identity theft stuff is newer so I think it's just that nobody anticipates it until they see it.

[Burke]

See https://www.irs.gov/Individuals/Empl...r-5071C-Letter

[FEDUKE404]

Questions

I am intrigued by this entire sequence, and if S T ever finds out a "reason" for the letter (which she can share with us) I would like to know the answer.

It's nothing but wild speculation, but the scenario would seem to indicate a possible conflict (other tax returns?) for either the H/W or the dependent. What age is the dependent - college or much younger?

Absent any true indications of identity theft (other than the unknown reason for the 5071C), I would probably refrain from asking for an Identity Protection PIN. I'm not sure merely receiving a 5071C from the IRS would be enough to generate the need for one.

The helpful IRS link provided by Burke explains much. Is there a possibility some of the (internal) prior-year numbers were absent from your tax data file and efile, such as new software or something?

One suggestion: I've learned from previous (non-IRS) events that the government will often ask security questions based upon an Equifax credit report. (Such as "What year did you open an XYZ credit card account?") I was not answering a question correctly, and you only get a couple of tries. Helpful person at Soc Sec website told me the trick, and I later found that the Soc Sec computer and I had soft-accessed my Equifax credit history within a day or so of each other.

Please keep us posted!

FE

[S T]

Thanks all for replies to my post - I have not seen this letter before and yes I went to the IRS website to verify that it was legitmate along with many other google searches. Several years ago there were some references that it could be a scam.

The intrigue and curiosity on my part is why did the Taxpayer and Taxpayer's dependent receive the letter. Background on this client that I have been preparing for 20+ years, is really no change in reporting - In reviewing the 2014 returns that I prepared for both Taxpayer and Taxpayer dependent, there is nothing unusual on the return, and I would like to believe that I practiced due diligence in matching all IRS documents, as in W-2, 1099 forms, Interest/Dividends and Mortgage Interest - I always compare prior year to current year when completing a Tax Return!

This is an IRS letter that I have not seen in the past so I guess I can only "call it" as "Random" and the so called new step up in ID Theft

I agree after researching, unless the Taxpayer's account has actually been compromised, I will not suggest the ID PIN.

The unfortunate part of this letter is that a POA is basically useless, I only have the tax information, not any of the "non-governmental" credit information, so the Taxpayer will be on their own to try the online link through a 3rd party, I will offer to be on the phone with them while they try to complete. Guess I understand about the POA as there are some "not so professional and reliable tax professionals" but it does complicate the issue for the Taxpayer. I just hope my group of Taxpayers that does NOT use Computers and would have to use phone services, does not receive one of these letters.

Going to let the Taxpayer know to sign in to the online link - and I will post when we know more!

Sandy