Identity theft is a growing concern in our digital age, affecting thousands of Americans each year. In fact, during the 2023 tax season, the IRS flagged over 1 million tax returns as potentially fraudulent, and among these, 12,617 cases have been confirmed as instances of identity theft, as per the Treasury report.
Nobody wants to fall victim to identity theft. However, if you ever receive a dreaded letter from the IRS notifying you of potential identity fraud, don’t panic. In this article, we will guide you on how to respond properly to such letters and provide tips on avoiding becoming a victim in the first place.
What is Identity Theft
Identity theft happens when someone steals your personal information, including your Social Security number, bank account details, or other sensitive data, to commit fraudulent activities, such as filing fake tax returns to claim refunds.
Reasons the IRS May Suspect Tax Returns as Identity Theft
The IRS employs various measures to identify patterns and anomalies in tax returns. If certain red flags are detected, such as sudden changes in income, discrepancies in reported information, or multiple tax filings using the same Social Security number, the IRS may flag the returns for further investigation.
Some common warning signs of tax-related identity theft include:
- Inability to e-file your tax return due to a duplicate Social Security number
- Receipt of IRS notices indicating unauthorized requests for tax transcripts
- Letters or notices from the IRS about income, employers, or deductions that you do not recognize
- Receipt of notices or bills for taxes owed on income you did not earn
- Discovery of unauthorized access to your IRS online account
- Notification from the IRS about the creation of an online account in your name
- IRS records indicating you received wages or other income from an employer you didn’t work for
- Notification from the IRS that you owe additional tax or face a refund offset or that collection actions have been taken against you for a year in which you did not file a tax return
- Assignment of an Employer Identification Number (EIN) without your request or knowledge
Identity Fraud Letters the IRS May Send
When the IRS suspects identity theft due to a potentially fraudulent return filed under your Social Security number (SSN) or individual tax identification number (ITIN), they will notify you through specific letters. It’s crucial to be aware that the IRS won’t process the return until you verify your identity. Here are some letters they may send and what you should do if you receive one.
- Letter 5071C: Online Verification
If you receive Letter 5071C, the IRS is requesting you to verify your identity online through the Identity and Tax Return Verification Service. To get this done, register on the website, sign in or create an account, answer questions about your tax return, and keep your 5071C letter and tax return for the specified year handy. If you didn’t file a return, you can indicate that online.
- Letter 4883C: Verification Call
If you get Letter 4883C, the IRS needs you to call the Taxpayer Protection Program Hotline. When making the call, make sure to have your 4883C letter, the tax return mentioned, a prior year return if applicable, and supporting documents like Forms W-2 and 1099 ready.
- Letter 5747C: In-Person Verification
If you’re a recipient of Letter 5747C, the IRS instructs you to verify your identity in person. To initiate this process, call the Taxpayer Assistance Center to schedule an appointment for your visit.
How to Respond to Identity Theft Letter from the IRS
Receiving a letter from the IRS related to identity theft can be unsettling, but it’s important to take prompt and appropriate action. First and foremost, do not ignore the letter. Open it and carefully read the contents to understand the specific concerns raised by the IRS. The letter will provide you with instructions on how to verify your identity and address the issues raised.
How To Report Identity Theft
If you believe you’re a victim of identity theft, report the incident promptly. Visit IdentityTheft.gov to report your case. If the IRS rejects your tax return due to a duplicate filing with your Social Security number, complete Form 14039 and mail it to the IRS along with your tax return. Alternatively, call the IRS at 800-908-4490 for specialized assistance regarding identity theft concerns.
Helpful Tips To Avoid Identity Theft
Prevention is the first line of defense against identity theft. Here are some practical tips to safeguard your personal information:
1. Secure Your Personal Information
Keep sensitive documents, such as your Social Security card and financial statements, in a secure location. Be cautious when sharing personal information online and only provide it to trusted sources.
2. Monitor Your Financial Statements
Regularly review your bank statements, credit reports, and other financial documents for any suspicious activities. If you notice any discrepancies, report them promptly to your financial institution.
3. Use Strong Passwords
Create strong, unique passwords for your online accounts. Avoid using easily guessable information, such as birthdays or names, and consider using two-factor authentication whenever possible to enhance security and protect against identity theft.
4. Be Wary of Phishing Attempts
Exercise caution when clicking on links or providing information in response to unsolicited emails or messages. Verify the legitimacy of requests before sharing sensitive details to protect yourself from potential phishing threats.
5. File Your Taxes Early
Filing your tax returns early reduces the window of opportunity for identity thieves to submit fraudulent returns using your information.
Identity theft is a serious threat, and it’s important to stay alert and take action. If you get a letter from the IRS or suspect you’re a victim of identity theft, don’t wait—act fast and report it. At Tax Samaritan, we’re experts in dealing with these situations, and we’re here to help guide you through the process. Contact us today for expert assistance with your taxes!