Tax Refund Fraud

Identity Protection Personal Identification Number

In mid-November 2011, some taxpayers with identity theft indicators on their accounts began receiving an IRS notice letter advising them that they will be receiving a new Identity Protection PIN (IP PIN). About one month later, another letter follows, assigning a special new 6-digit IP PIN number to the taxpayer for the 2011 taxation year. This new IP PIN is an authenticator that must appear on the taxpayer’s 2011 tax return. This safeguard will allow the legitimate return to bypass the filters and expedite processing for the tax year.

The taxpayer will receive a new IP PIN for each successive taxation year that the identity theft indicator remains on their account. The IP PIN letter may look like this sample http://www.irs.gov/pub/notices/cp01a_english.pdf .

Since January 2011, the IRS has been issuing victims of Identity Theft an Identity Protection Personal Identification Number (IP PIN) to use when filing future returns. 1040 series tax forms have been revised to allow for entry of the IP PIN. The IRS hopes the IP PIN will avoid delays in filing and processing tax returns for taxpayers verified by the IRS to be victims of identity theft.

Contact the IRS if you believe you are a victim of identity theft. If you believe your IRS records may be at risk due to a lost/stolen purse or wallet, questionable credit card activity, credit report, or other activity. See IRS Form 14039, Identity Theft Affidavit to notify the IRS that you are a victim of Identity Theft.

You can also can the IRS Identity Protection Specialized Unit at (800) 908-4490.

Refund-Related Identity Theft

  • An identity thief uses a legitimate taxpayer taxpayer’s identity to fraudulently file a tax return and claim a refund. Usually, the identity thief will use a stolen Social Security Number (SSN) to file a forged tax return to obtain a fraudulent refund early in the filing season.
  • The legitimate owner of the SSN may only discover this has happened when the return is filed later in the season and it is revealed that two returns have been filed using the same SSN.

Employment-Related Identity Theft

  • An identity thief uses someone else’s name and/or SSN to obtain a job. Then, the identity thief’s employer will report the employee’s wage information to the IRS, just as the legitimate taxpayer’s employer reports his legitimate wages.
  • The IRS may conclude that the legitimate taxpayer has not properly reported all earned income and a notice of unreported / underreporting income would be generated and sent to the taxpayer. Then, the legitimate taxpayer must work with the IRS to resolve his account issues and obtain an identity theft marker on his account. The legitimate refund is often delayed.
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About Bruce Demarest

Bruce Demarest is a Identity Theft Protection Specialist. He has designed and taught classes to educate individuals and businesses in identity theft risk management. The individuals have learned how to continuously monitor their financial identities from credit fraud, plus how to monitor their personal identifying information for unauthorized use. His business clients have become compliant with the federal & state privacy laws. He has conducted information security audits to identify their potential problems and has designed security policies, programs, and practices to address those problem areas.
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2 Responses to Tax Refund Fraud

  1. I like this information about federal tax 1040. Online federal tax filing is the best way.

  2. Pingback: IRS missing billions of tax dollars to Identity Theft | Bruce Demarest Creating Cultures of Security

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