Treasury Inspector General for Tax Administration suggests the IRS could lose $21 billion to tax fraud over the next five years. While these numbers continue to increase, you could potentially become a victim of tax fraud. All the crooks need is your name and social security number. Aside from a delay in receiving your refund; there are a few other implications. Here is what you can expect while you have an open ID theft case with the IRS:
IRS Collection Notices– You may receive notices demanding you repay the refund you never received (this notice is the most troubling). Contact the IRS immediately and inform them you are a victim of identity theft-this will allow them to put a collection hold on your account while the ID theft case is pending. Although you may have submitted the Identity Theft Affidavit, it is best to respond to such notices.
Estimated Tax Payments– Your payments may have been refunded to the crooks; once your case is resolved the IRS will reapply these payments to your account.
- Mortgage Loans– The income showing on your account transcripts will not match your actual return. In most cases the crooks will file with substantially lower income to receive the earned income credit on fraudulent tax returns. This could prove challenging because the fraudulent return is posted to your IRS account. You will need to provide proof to the lender that you are a victim of ID theft.
- FAFSA (Student Loan) applications– You will need to provide proof to school that you are a victim of ID theft. The income will not match IRS records as explained above.
- Refund Delay-It may take 6 months or longer to receive your refund.
- State Refunds– Most likely the criminals received a state refund, too. Notify your State Department of Revenue that you are a victim of IRS identity theft, which will likely cause a delay in receiving your refund. Your state may require you to complete a separate ID theft affidavit.
- IRS Pin Number– Assuming you have submitted your ID theft affidavit, in December you should receive a pin number to file future tax returns. The pin number should protect you from becoming a victim of IRS identity theft again.
Keep in mind, these are only IRS and State implications; it will be prudent for you to immediately place a free initial 90 day fraud alert with Equifax, Experian, and TransUnion. After 90 days you will be allowed to place an additional free seven year fraud alert on your account. Additionally, file a report with the Federal Trade Commission and your local police. The IRS website www.irs.gov provides more in-depth information on identity theft.
Finally, you are entitled to representation by an Enrolled Agent, Attorney, or CPA to handle your case. Although, it may be troublesome to discover you are a victim-the issue will get resolved in time. However, if the delay in refund is causing you economic hardship; contact the Taxpayer Advocate Office to expedite your case. Do not worry the IRS will eventually correct your account. In the meantime, you will need to exercise patience and diligence in resolving your case. Hopefully, the IRS will find a way to stop ID theft.