Tax season is a busy time for tax professionals. The same can be said about crafty criminals intent on stealing other people’s identities and committing fraud. Tax-related identity theft is on the rise. Tax I.D. theft occurs when scammers file fraudulent
tax returns using someone else’s Social Security number (“SSN”) so they can take their refund. Typically, consumers aren’t aware that they are a victim until they attempt to file their tax return, only to be notified by the Internal Revenue Service (“IRS”)
that someone else has already filed in their name.
Tax professionals can be a major asset to people who may have fallen victim to tax I.D. theft. Some warning signs that may tip a tax professional off include:
- A rejected return indicating someone has already filed with the client’s name or SSN.
- An IRS notice reporting wages from an unfamiliar employer.
- A balance due, refund offset, or a collection action taken for a year in which the client did not file a tax return.
- Spotting activity about a tax return after all issues have allegedly been resolved.
For business clients, some warning signs may include:
- The IRS refers to an amended return when the company has yet to file.
- The company receives notices about unknown employees.
- There is activity related to defunct or dormant affiliates or subsidiaries.
Tax professionals can serve as a valuable resource to clients that have been victimized by identity theft. BCA interviewed Dwayne Harrison, Jr., of
1st Quality Tax Service in Inglewood, California, to find out how their company helps clients who have been affected by tax I.D. theft. Mr. Harrison stated that, “We help clients that have been victimized by providing them with the correct contact numbers
to reach the IRS. Once I.D. theft is verified, our preparers file the client’s current tax return, along with an Identity Theft Affidavit, and any requested information by mail.” Harrison goes on to say that, “Victims will have to file future returns in accordance
with IRS procedures and include the special PINs issued from the IRS to ensure that the person filing is, in fact, the correct entity.” Lastly, he provided a few words of advice for fellow tax professionals and how they can protect clients’ information, “Locks
should be in place on all file cabinets and computers should be secured with login and passwords. Client information should never be left out in the open after business hours. Finally, shred any documents that are not needed.”
The Federal Trade Commission (“FTC”) and IRS have free resources available to provide clients with aid if they are affected. Some of the resources available are brochures, sample letters
and forms, as well as contacts to help resolve tax I.D. issues. Having these materials available for customers demonstrates the tax preparer’s goodwill and clients will likely to appreciate this welcome assistance.
If a client’s SSN has been compromised and they are victims of identity theft, preparers should immediately call the contact number on any notice the client receives from the IRS. In addition, completion of Form 14039, Identity Theft Affidavit, will allow
the IRS to put an indicator on the client’s tax records for questionable activity. Tax preparers should counsel clients to continue to file returns and pay taxes, even if it must be done by paper, while the case is being researched. If the IRS was previously
contacted and there was no resolution, call the Identity Protection Specialized Unit at 1-800-908-4490.
In addition, advise affected clients to:
- File a police report.
- Report I.D. theft to the FTC at www.identitytheft.gov or the FTC Identity Theft Hotline at 1-877-438-4338 or TTY 1-866-653-4261.
- Contact one of the major credit bureaus,
Experian,
Equifax, or
TransUnion to place a fraud alert on their records.
- Close any accounts opened fraudulently.
Tax preparers and other professionals can also help combat the rise of tax I.D. theft by implementing strong data security practices at their place of business. These practices should include ensuring sensitive information is safely stored. Highly sensitive
materials should never be kept in busy areas and should be locked away in file cabinets. This decreases the likelihood of shifty individuals getting hold of confidential documents. Don’t discard papers with clients’ SSN information or other sensitive data.
This is like gold to criminals. Use cost-effective technology tools to defend your network from hackers. Discourage clients from including sensitive information in unencrypted emails. Opt for safer alternatives when sending or receiving confidential data and
documents.
At a time when identity theft is so prevalent, it is essential that we all take the necessary precautions to thwart thieves’ plans to steal information and commit fraud. For more information, check out our resource guide “Identity
Theft”. View listings of
tax professionals in our BCA Member Directory.
About Business Consumer Alliance
Business Consumer Alliance (BCA) is a non-profit company which started in 1936. The broad purpose of BCA is to promote business self-regulation. BCA's mission is achieved by assisting consumers in resolving complaints with businesses and using that complaint
information, along with other relevant information such as customer reviews, to forecast business reliability. With community support, BCA can identify trustworthy and ethical businesses and warn the public to avoid unscrupulous businesses whose purpose is
to defraud the marketplace. BCA also helps businesses promote themselves by providing services and tools to protect their business and reach out to their customers. BCA obtains its funding from member businesses who support the mission and purpose of the organization
and who agree to abide by high standards of ethical business practices.