Identity Theft has become a major problem in the US but there are different problems associated with different kinds of ID theft. Identity theft of your credit card or bank information has a different effect on you than someone filing false documents on your behalf with the IRS.
The effect on you depends on which false document was filed with the IRS. It could be a return or an income statement or a credit claimed. But, not every false document filed with the IRS is considered Identity Theft:
These are examples of items NOT considered ID theft:
- Your spouse or ex-spouse signs your name fraudulently.
- Your spouse or ex-spouse induces you with duress or fraud to sign a return.
- Your spouse or ex-spouse falsely claims the children as dependents.
- You job or ex-job gave you an incorrect wage or income statement & reported it to the IRS.
Tax-Related Identity Theft: The IRS is only concerned with “tax-related” Identity Theft, which is defined as occurring “when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund”. See Pub 5027. So, they are only concerned when they lose money, not when you lose money. But, usually, you are not actually damaged when someone claims a fraudulent refund because you will (eventually) will get your lawful refund.
False Forms 1099MISC: What is more damaging is when, unbeknownst to you, someone uses your social security number in the issuance of a Form 1099MISC to the IRS, showing you made Self-Employment Income. When you don’t claim it on your tax return, the IRS will naturally send you a notice demanding payment. But, they won’t label it “Identity Theft” and open an investigation. Instead, they leave it up to you to “correct” the statement (which you obviously can’t do) or sue them in Court.
So, not every fraudulent document filed with the IRS is investigated as “Identity Theft”. Only those where a refund was claimed. This makes the IRS process particularly irritating. Now, your refunds will be frozen and every year the IRS will send you a new “PIN number” for you to place on your tax return.
If you receive a notice from the IRS such as Letter 673C and you know you did not file another return, you might have an Identity Theft Problem. Call the IRS at 1-800-829-1040 and ask them about the particulars of this second filing.
IRS Process: Usually, the process of ID Theft either begins with an IRS investigation (See Letter 4674C) or your request for an investigation. (See Form 14039). They will then send you either Notice CP01 or Letter 5073C. Then, you will not hear from the IRS for a very long time. If you call them they will not release any information to you and they will not send you your “Account Transcripts”.
But, eventually, they will send you Notice CP01A giving you a “Personal Identification Number” to put on your return. You will receive a new notice & a new number every year so watch the mail & keep the IRS advised of any new address you may have (Form 8822).
You will never know exactly what fraud was perpetuated on your account. The IRS does have a special webpage devoted to ID Theft and they have links to their publications:
Publication 5027 –Â Identity Theft Information for Taxpayers
Publication 5199 – Tax Preparer Guide to Identity Theft
Taxpayer Guide to Identity Theft
In sum, although tax-related ID theft can be very irritating and frustrating you likely will not suffer any financial harm.
The Taxpayer's Advocate 