No question, tax-related identity theft is an increasingly common problem. If you have been unscathed so far, count yourself as lucky. Just ask around, and you will be surprised to see how many individuals have been impacted by this nasty problem. So, what do you do if you if you become a victim?

You’ll want to take the following steps.

  • File a complaint with law enforcement.
  • File a complaint with the Federal Trade Commission at consumer.ftc.gov or the FTC Identity Theft hotline at 877-438-4338.
  • Contact one or more of the major credit bureaus to place a “fraud alert’ on the account:
  • Close any accounts that have been tampered with or opened fraudulently.
  • Respond to any IRS compliance notice received. Call the telephone number on your notice or letter if the IRS is requesting additional information to process the return due to potential identity theft.
  • Continue to file your tax return, even if you must do so by paper. If your return was rejected, file a paper return and include Form 14039 (Identity Theft Affidavit). Attach proof of your identity, such as a copy of your social security card, driver’s license, or passport.
  • When required, use the IP PIN assigned to the client by the IRS on future tax returns filed electronically.

Identity Protection Personal Identification Number (IP PIN)

The IP PIN is a unique, six-digit number that is assigned annually to victims of identity theft for use when filing their federal tax return. An IP PIN helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return. When a taxpayer has an IP PIN, it prevents someone else from filing a tax return with their SSN.

The IRS issues a new IP PIN each December by mail. When a taxpayer receives a Notice CP01A, the IP PIN is located in the left column, last paragraph, which states: “Your assigned 20XX IP PIN is: _____.” Taxpayers who lose their IP PIN or don’t receive a new one can log into www.irs.gov through “Get an IP PIN” or visit “Lost or Misplaced IP PINs” for further information on how to retrieve it.

How to reduce your risk of Tax ID Theft

  • Don’t routinely carry your Social Security card or any document with your SSN on it.
  • Don’t give a business your SSN just because they ask – only when absolutely necessary.
  • Protect your personal financial information at home and on your computer.
  • Check your credit report annually.
  • Check your Social Security Administration earnings statement annually.
  • Protect your personal computers by using firewalls, anti-spam/virus software, and update security patches
  • Regularly change passwords for Internet accounts.
  • Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking.

Written by Patrick Wirth, CPA, CVA | Partner
Posted in Business Advisory, Tax