Small Business Taxes & Management^TM--Copyright 2013, A/N Group, Inc.

Stopping identity theft and refund fraud is a top priority for the IRS. The agency's work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2013 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

By late 2012, the IRS assigned more than 3,000 IRS employees--over double from 2011--to work on identity theft-related issues. IRS employees are working to prevent refund fraud, investigate identity theft-related crimes and help taxpayers who have been victimized by identity thieves. In addition, the IRS has trained 35,000 employees who work with taxpayers to recognize identity theft indicators and help people victimized by identity theft.

Refund Fraud Detection and Prevention

The IRS has expanded its efforts on refund fraud detection and prevention for the 2013 tax season in several ways:

• For 2013, there has been a significant increase in the number and quality of identity theft screening filters that spot fraudulent tax returns before refunds are issued. The IRS has dozens of identity theft filters now in place.
  
• IRS Criminal Investigation tripled the number of identity theft investigations in Fiscal Year 2012, starting 900 investigations. Nearly 500 people have been indicted across the country. Several hundred more investigations have started since October.
  
• The IRS expanded a pilot program that allows local law enforcement agencies in nine states to obtain tax return data that helps us investigate and pursue identity thieves. More than 65 law-enforcement agencies are involved in this effort.
  
• The IRS is collaborating with more than 130 financial institutions to identify identity theft fraud schemes and block refunds from reaching the hands of identity thieves. This effort has protected hundreds of millions of dollars so far.

Increasing Efforts to Help Victims

The IRS understands that identity theft is a frustrating, complex process for victims. While identity thieves steal information from sources outside the tax system, the IRS is often the first to inform a victim that identity theft has occurred.

While the IRS has made considerable progress in this area, more works remains. Identity theft cases are among the most complex handled by the IRS. The IRS is continually reviewing processes and policies to minimize the incidence of identity theft and to help those who find themselves victimized. Among the steps underway to help victims:

• IP PIN expansion. The IRS continues to expand the number of Identity Protection Personal Identification Numbers (IP PINs) being issued to victims. The IP PIN is a unique identifier that shows that a particular taxpayer is the rightful filer of the return. In 2013, the IRS has issued IP PINs to more than 600,000 taxpayers who have been victimized by identity theft. That's more than twice as many as the previous year. The IP PIN will allow these individuals to avoid delays in filing returns and receiving refunds.
  
• Victim case resolution. The IRS continues to put more and more employees on resolution of victim cases. These are extremely complex cases to resolve, frequently touching on multiple issues and multiple tax years. Cases of resolving identity can be complicated by the thieves themselves calling in. The IRS is working hard to streamline its internal process, but much more work remains. A typical case can take about 180 days to resolve, and the IRS is working to reduce that time period.
  
• Service options. The IRS is providing information in several ways ranging from a special section on IRS.gov devoted to identity theft to a special phone number available for victims to resolve tax issues. The IRS Identity Protection Specialized Unit is available at 1-800-908-4490.

IRS Criminal Investigation

The IRS's Criminal Investigation division is a major component of the IRS's effort to combat tax-related identity theft. It will continue to utilize the full capabilities and resources to investigate those who steal from taxpayers through identity theft.

In Fiscal Year 2012, the IRS tripled its number of criminal investigations compared to 2011 by initiating nearly 900 investigations regarding identity theft, which resulted in almost 500 indictments.

Beyond the criminal actions, IRS enforcement personnel in January 2012 simultaneously conducted a sweep of approximately 150 money services businesses to help make sure these businesses are not knowingly or unknowingly facilitating identity theft or refund fraud. The visits occurred in nine high-risk locations across the country.

Nontax Tips to Avoid Identity Fraud From the IRS

Here are some tips to protect you from becoming a victim, and steps to take if you think someone may have filed a tax return using your name:

Tips to protect you from becoming a victim of identity theft

• Don't carry your Social Security card or any documents with your SSN or Individual Taxpayer Identification Number (ITIN) on it.
  
• Don't give a business your SSN or ITIN just because they ask. Give it only when required.
  
• Protect your financial information.
  
• Check your credit report every 12 months.
  
• Secure personal information in your home.
  
• Protect your personal computers by using firewalls, anti-spam/virus software, update security patches and change passwords for Internet accounts.
  
• Don't give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost or stolen purse or wallet, questionable credit card activity or credit report, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 (Mon. - Fri., 7 a.m. - 7 p.m. local time; Alaska & Hawaii follow Pacific Time).

If you believe you're a victim of identity theft

Be alert to possible identity theft if you receive a notice from the IRS or learn from your tax professional that:

• More than one tax return for you was filed;
  
• You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return;
  
• IRS records indicate you received more wages than you actually earned or
  
• Your state or federal benefits were reduced or cancelled because the agency received information reporting an income change.

If you receive a notice from the IRS and you suspect your identity has been used fraudulently, respond immediately by calling the number on the notice.

If you did not receive a notice but believe you've been the victim of identity theft, contact the IRS Identity Protection Specialized Unit at 800-908-4490, extension 245 right away so it can take steps to secure your tax account and match your SSN or ITIN. Also, fill out the IRS Identity Theft Affidavit, Form 14039.

In addition, the IRS recommends you take additional steps with agencies outside the IRS:

• Report incidents of identity theft to the Federal Trade Commission at www.consumer.ftc.gov or the FTC Identity Theft hotline at 877-438-4338 or TTY 866-653-4261.
  
• File a report with the local police.
  
• Contact the fraud departments of the three major credit bureaus:
  • Equifax -- www.equifax.com, 800-525-6285
    
  • Experian -- www.experian.com, 888-397-3742
    
  • TransUnion -- www.transunion.com, 800-680-7289
  
  
• Close any accounts that have been tampered with or opened fraudulently.

For the full text of the IRS Fact Sheets discussed above go to Fact Sheet 2013-02 and Fact Sheet 2013-03

The IRS has two additional web pages that provide a wealth of information, both tax related and nontax.

http://www.irs.gov/uac/Identity-Protection-Tips
http://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft

--Last Update 01/28/13