IRS Reverses Course on ID Theft Returns

June 10, 2015 by Carolyn Richardson, EA, MBA
Person on computer attempting ID theft

The issue of tax return-related identity theft is a growing problem. The IRS estimates they received over 2.4 million fraudulent returns for the 2013 filing year. If you’ve been the victim of this type of crime, you know that it can be a frustrating experience to have this happen to you. Not only is it indicative that you may have other identity theft related problems, such as credit card issues, but trying to deal with the IRS over trivial tax problems can be frustrating, and return-related ID theft is not a trivial problem.

To make matters worse, the IRS generally has refused to provide taxpayers with a copy of the fraudulent return that they received. IRS cited the privacy restrictions afforded to all taxpayers under Section 6103 in refusing to provide the legitimate taxpayer with a copy of the fraudulent return. Their logic is that the return may contain private information of the identity thief and, under the law, they are prohibited from providing that information to “unauthorized persons,” including the real taxpayer. A taxpayer’s only option to obtain the return is to make the request through a law enforcement officer.

Hope, however, is on the way. The IRS recently announced that they will be changing this policy. While they have not yet announced how taxpayers can request copies of fraudulent returns, they have announced that sometime in the near future this will be an option. This was done after Senator Kelly Ayotte of New Hampshire wrote the IRS a letter urging a change in policy. As Senator Ayotte stated, “Victims of identity theft face significant emotional and financial hardships, and they shouldn’t be left in the dark about the extent of the theft.” Ayotte became aware of the issue after receiving complaints from her constituents about IRS’s refusal to provide copies of the ID theft returns. Senator Ayotte has also introduced a bill called the “Social Security Defense Act of 2015,” which would require the IRS to inform taxpayers when they have been the victim of potential ID theft, and would also require the Social Security Administration to notify employers if someone is using a fraudulent social security number.

None of this is related to the recent IRS announcement that the online “Get Transcript” system had been accessed by thieves posing as legitimate taxpayers. The investigation into that is ongoing but ,in the meantime, the system has been turned off. IRS will be sending letters to taxpayers who were affected by this problem. And just to clarify, none of the IRS’s actual systems were hacked into as alleged on some media. The security breach was identified by the IRS, and it involved thieves posing as real taxpayers. In order to do this on the “Get Transcript” system, the thieves would have had to have already been in possession of significant personal data of a taxpayer - not just their name, address, and social security number. The transcript system also asked for information from the taxpayer’s credit history to verify the taxpayer’s identity before giving access to the system, such as lenders the taxpayer had used for financing cars or homes, and prior addresses where they had lived.

As always, if you suspect you are the victim of identity theft, whether through your tax return or some other means, you should report this to the credit reporting agencies, law enforcement, and the IRS.

Tags: IRS, tax scams



Carolyn Richardson, EA, MBA
Learning Content Managing Editor


Carolyn has been in the tax field since 1984, when she went to work at the IRS as a Revenue Agent. Carolyn taught many classes at the IRS on both tax law changes and new hire training. In 1990, she left the IRS for a position at CCH, where she was a developer on both the service bureau software and on the Prosystevm fx tax preparation software for nearly 17 years. After leaving CCH she worked at several Los Angeles-based CPA firms before starting at TaxAudit as an Audit Representative in 2009. Carolyn became the manager of the Education and Research Department in 2011, developing course materials for the company and overseeing the research requests. Currently, she is the Learning Content Managing Editor. 


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