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Susan Tompor: What should real filers do when hit by tax-ID fraud?

McClatchy-Tribune Information Services

March 23, 2015


What do you do if fraudsters already filed a tax return using your ID?

It’s a question that’s popping up now in the middle of tax season. The con artists typically steal ID and then file fake returns in January. Then, when the legitimate taxpayer tries to electronically file a return, it’s a no-go. The real filer’s return is rejected as a "duplicate" because a refund has been issued and the filer’s Social Security number was already used to file a 2014 return.

The red flags to tax-related ID fraud can be shocking. One Detroit-area resident reported to police in early March that he received a tax refund check in the amount of $9,832. Not so small problem? The man had not yet filed his federal tax return. (The fraudsters in this case likely were goofballs who were in too much of a rush, tax experts said, because the right boxes need to be checked so the refund is directly deposited in an account the con artist controls, such as a prepaid card.)

George W. Smith, a certified public accountant, had clients who received letters from the Internal Revenue Service’s Integrity & Verification Operations department about a review relating to the use of the Earned Income Tax Credit or business income. But the real taxpayers had not even filed returns at the time they received the letters.

All it takes is one compromised Social Security number for a married couple or family.

Matt Okkerse, a certified public accountant, said last year a couple, both professionals, ran up against someone using one of their Social Security numbers to file a fraudulent return.

"We found out because the return was bounced from e-filing, stating that the spouse’s Social Security number was used as the taxpayer on another return."

Tax fraud relating to ID theft is on the IRS dirty dozen list for scams. The IRS said it is increasing its use of models to detect ID theft fraud and stop scam artists from receiving refund money. The con artists don’t get your exact tax refund. Instead, they create a return that generates a fairly generous refund by using specialized tax credits.

Overall, the FTC has identified tax-related identity theft as a top source of identity theft complaints.

About 42 percent of the ID theft complaints were filed by victims ages 39 and younger.

The Detroit area ranked No. 10 in the largest metro communities with ID theft complaints. The Miami area was No. 1.

Discovering that a con artist used your ID to file a fake return is unsettling. Many people have no idea what to do, and I’ve received several calls this tax season. Here are some of the steps:

Step One: The Internal Revenue Service will require that you submit IRS Form 14039, Identity Theft Affidavit, if scammers filed a fake return using your ID.

Form 14039 is designed so you can prove you’re the real taxpayer.

So if your return is rejected as a duplicate when you e-file this season, Form 14039 needs to be filed. You’d check Box 1 in Section A if you’re a victim of ID theft and that the theft is affecting your federal tax records.

The form can also be used if the Social Security number of a deceased spouse or other deceased relative was used to file a fraudulent return.

Here’s another twist: Form 14039 can be filed if your ID was compromised but not used yet to file a fake return. You’d have to see Box 2 on the form in such cases, such as if there’s evidence of misuse of your personal information to obtain credit. Or if you’ve had a home robbery or a purse stolen and your Social Security card was stolen.

Step Two: You’d still need to file your 2014 tax return if a fraudster already filed one using your ID. But you must do so by paper, not e-filing.

If you are unable to file your return electronically now because the primary and/or secondary Social Security number was misused, you’d attach Form 14039 and documentation to your paper return and submit it to the IRS location where you normally file.

Step Three: Recognize that it’s going to take some time to get your refund if a crook filed a fake return with your ID.

Consumers need to take various steps, including filing a police report, and be patient with the aftermath of tax-related ID fraud.

You’d also need to file a complaint at the Federal Trade Commission at www.ftc.gov if you’re a victim of tax-related ID theft.

Mark Ciaramitaro, vice president of H&R Block tax services, said many times it can take 120 to 180 days before legitimate taxpayers receives their refunds after ID tax fraud has taken place. Some clients, he said, have had to wait up to a year.

The taxpayer goes through a case management program, provides documentation and proves that he or she is the true taxpayer.

"The IRS has to know the person that they’re dealing with is real," Ciaramitaro said.