IRS Procedures After an Individual’s ID Theft Is Validated
If you have been the victim of identity theft, you will need to alert the IRS. After a taxpayer's ID theft is proven and validated, the IRS follows a specific set of procedures. These are outlined below.
-
The first step in the process is for the taxpayer to complete and file IRS Form 14039, Identity Theft Affidavit.
-
The IRS flags the taxpayer’s account to show ID theft documentation has been submitted.
-
IRS reconciles the taxpayer’s account to reflect the correct tax return information.
-
The IRS places an identity protection indicator on the taxpayer’s account and notifies the taxpayer with a CP01 notice.
-
Prior to the next tax season the IRS will assign the taxpayer a unique IP protection PIN to verify the return.
-
If a taxpayer is identified as being deceased, the IRS locks the account to prevent any future filings.
-
The IRS assigns a six-digit IP PIN number to a verified ID theft victim that is specific to the tax year, which is used to file their return for that year.
-
A new six-digit IP PIN number is issued every year.
-
This process is only required if the primary taxpayer is the ID victim.
-
E-filed returns requiring IP PINs will be rejected if an IP PIN is missing or incorrect.
-
Taxpayers who misplace their IP PINs must contact the IRS for a replacement
The IRS is requesting the help of tax professionals: Please refer only taxpayers who receive Letter 5071C or Letter 4883C to the Taxpayer Protection Program (TPP) toll-free line. The TPP line is set up for identity verification for letter recipients. TPP assistors do not have information to help your clients with other issues such as refund inquiries.
IP PIN Program Expansion
Starting in 2021, individuals may voluntarily opt into the IP PIN program as a proactive way to protect against tax-related identity theft. To opt in, the individual must pass a rigorous identify verification process. Spouses and dependents are also eligible for an IP PIN, but only if they can pass the ID proofing process. The IP PIN is valid for one calendar year, and a new IP PIN will need to be obtained each year. Those who volunteer for the opt-in program can use the online Get an IP PIN tool at IRS.gov but be aware that the IP PIN tool is generally not available from mid-November through mid-January each year.
Alternatively, instead of using the online tool to get an IP PIN, an individual who doesn’t already have one assigned can complete IRS Form 15227, Application for an Identity Protection Personal Identification Number (IP PIN) and submit it by U.S. mail or fax (refer to the form for the address or fax). To qualify to use Form 15227, the individual must have an SSN or ITIN, have annual AGI less than $73,000 ($146,000 joint) on their last filed return and have access to a telephone.
Notification of Suspected Identity Theft
Often identity theft and refund fraud victims may be unaware that their identity has been used fraudulently or, when they are aware, may not be fully informed of the outcome of their case. The Taxpayer First Act addresses this situation by requiring the IRS to notify a taxpayer if it determines there has been any suspected unauthorized use of a taxpayer's identity, or that of the taxpayer's dependents, if an investigation has been initiated and its status, whether the investigation substantiated any unauthorized use of the taxpayer's identity, and whether any action has been taken (such as a referral for prosecution). Furthermore, when an individual is charged with a crime, IRS must notify the victim as soon as possible, giving such victims the ability to pursue civil action against the perpetrators. (Code Sec. 7529(a), as added by Act Sec. 2007(a)) Effective for determinations made after the date that is six months after the date of enactment (July 1, 2019).
Penalty Relief
As part of the Taxpayer First Act, Congress directs the Secretary of the Treasury (or a delegate, i.e., the IRS) to establish procedures to ensure that income reported in connection with the unauthorized use of a taxpayer's identity is not considered in determining any penalty for underreporting of income by the victim of identity theft. Applies to determinations made after the date that is 6 months after the date of the Act’s enactment (July 1, 2019). (Act Sec. 2007(b))