Possible ID theft - best course of actioin

[taxbrewster]

Good morning everyone - wondering if anyone has dealt with this before.

I have a local doctor who received his 1099 with a stamp on it stating "received open" from the postal service. Of course the person that prepped the 1099 included his entire SS number did not "xxx" his number. His office has a long history of other docs / employees being hit with fake tax returns being filed under other SS#. However he has always skated by and not been hit but is VERY concerned this year. Are there any proactive steps that I could take so the IRS could flag his account?

Any thoughts to filing a blank return and then amending the return when I have all the docs because we usually don't file till April? The IRS just is usually reactive and won't do anything until the theft has taken place.

 

Any advice would help. Thanks!

 

[BHoffman]

See form 14039, Section B, number 2.  https://www.irs.gov/pub/irs-pdf/f14039.pdf

Might be an option...

 

[Lion EA]

Other than tax issues, tell him to freeze his accounts with the three credit reporting agencies.

Anyone:  do you know if filing an extension would return a reject if someone has filed a return with that SSN?  If so, that could be a method to find out....

[taxbrewster]

Thanks for the input - I was thinking about filing the 14039 as an option. Thing that might be the best option.

He has already put a hold on his accounts. Good there. Thanks.

I also did think about going the extension route as well to check but was concerned on the time between extension and when we file the actual return as a possible window to be taken advantage of. That is why I was heading down the road of submitting a blank return and then going the amendment route.

[Medlin Software, Dennis]

With some tax agencies requiring unmasked ID numbers (MT recently put out a bulletin reminding they must have fill numbers), if one believes their SSN is secure or wants to try to keep it unknown, they should obtain an EIN or other allowable ID to use for tax forms.

Personally, while I do not want my information in the wild, the number of things requiring divulging a SSN make it impossible to consider secure.  For instance, anyone volunteering with a youth sports group has to divulge their SSN for an annual background check.  The person who can see your SSN (assuming they follow the rules) is another volunteer who is NOT required to pass any background checks...  (One of many reasons I no longer volunteer with such groups.)

[Jack from Ohio]

Taxpayer Protection Program

800-830-5084

[B. Jani]

Here is the checklist. safe attachment.

Identity Theft Check List.pdf

[SaraEA]

I wouldn't file a blank return.  Put some numbers on it--bank interest, mortgage interest, whatever, just enough so there is no tax liability.  I don't know if a blank return will be accepted.  Then amend.  We have had two or three taxpayers on extension whose actual returns later rejected.  Apparently not all fake returns are filed in the first couple of weeks.  One of these clients got a letter from IRS saying his refund would be increased by over $120k because he neglected to include his estimated payments--and this was after he filed the 14039.    Let's hope the thief didn't get that windfall.  I was annoyed that there was no filter alerting the computer system that while some people might forget they paid an estimate or two, who would forget $120k?

[Margaret CPA in OH]

What about that pesky part on the bottom of page 2 about declaring the return being true, correct, etc. ?  I think I would file an extension but wouldn't file a false return with the knowledge that it wasn't true, etc. and knowing it would be amended when all the actual information is finally available.  Just me, maybe, but I would not fill in numbers, even those already known, with the full knowledge that it wasn't complete. 

[Catherine]

10 hours ago, Margaret CPA in OH said:

I think I would file an extension but wouldn't file a false return

I understand your point - but filing an extension will NOT prevent a false return being filed by someone else.  I have some clients for whom we filed extensions last year (because we did not yet have full docs) and when we went to file - could NOT - because someone else already HAD.  That was VERY disturbing to me -- but in a case like this, I would have no trouble with my ethics filing that "place-holder" and nearly-blank return to prevent fraud.

[taxbrewster]

Thanks for the comments, I believe I am going to file 14039, give them a shout and at least make them aware of the situation. I will keep you posted if anything else develops.

 

[Jack from Ohio]

23 hours ago, Jack from Ohio said:

Taxpayer Protection Program

800-830-5084

 

[Lion EA]

I figure it's the middle of February already and his SSN & info has been out there since it was mailed open in January.  So, my question re an extension being rejected or not was so the preparer/client can tell if ID theft has already taken place.  (I know well that an extension does not stop it.  Two years ago my own joint extension was filed, but someone used my SSN before October when we filed.)

I too would file a return with what's available sooner rather than later with the intention of amending if I thought it would stop fraud and the client chose that method.  But, if a return was filed in January, you can't stop that fraudulent return now.  If you do file before the thief, still take all the other measures in addition.

[BHoffman]

The Taxpayer Protection Program is used only after the client receives a notice from IRS.

I wouldn't automatically assume fraud. After all, whoever opened the mail did put it back into the postal system.  I'd think a fraudster would not have done that.

I would urge the client to get the return finished sooner than later, and if the efile is rejected then I'd re-file with 14039.  I wouldn't go through the hassle of filing an incomplete return with the intention of later filing an amended return.

[Catherine]

23 minutes ago, BHoffman said:

get the return finished sooner than later

Sometimes hard to do.  Don't we all have clients who get corrected 1099's every May, or partnership K-1's in September?  Depends on circumstances, I guess.  If a "real" return can be done quickly, wait.  But preferably not until September, assuming an extension shows no fraudulent return has yet been filed.

[BHoffman]

Extensions can be efiled and accepted AFTER the return has been efiled and accepted.  The extension will not be rejected. I have done it myself on my own return by mistake

[jklcpa]

^  that.  BHoffman is correct that the IRS system will still accept an extension even if a return has already been filed. Haven't some here filed extensions for clients that haven't brought data in when it gets close to the filing deadline, not knowing whether or not those clients will be coming in or have moved on to other preparers?  In those cases, the preparer filing an extension in that circumstance doesn't know if a return was filed by someone else or not.

[Catherine]

I have filed extensions and gotten rejections due to a return already having been submitted.  For one client, that was the first indication of identity theft.  But it was a couple of years ago; the system may have changed.