When Your Client is a Victim of Identity Theft

Posted on May 13, 2015 · Posted in Industry News

You may have thought the identity theft problem couldn’t get any worse, but recent cyberattacks affecting customers and employees of Anthem and other companies have released private information such as names, dates of birth, addresses, phone numbers, email addresses, employment information and Social Security numbers (SSNs) into the wrong hands. The Anthem data breach alone exposed personal data on approximately 80 million individuals. The IRS defines a data breach as “the intentional or unintentional release or theft of secure information. It can be the improper disposal of personally identifiable information in the trash or a sophisticated cyber-attack on corporate computers by criminals. It can affect companies large or small.”

Identity theft occurs when an individual’s personal in-formation is stolen and used without their permission. It is a serious crime that can wreak havoc with an individual’s finances, credit history and reputation, and it can take time, money and patience to resolve. Identity theft places a burden on its victims and presents a challenge to businesses, organizations and government agencies, including the IRS.

Tax-Related Identity Theft

Tax-related identity theft occurs when someone uses a stolen SSN to file a tax return claiming a fraudulent refund. Generally, an identity thief will file a false return with a stolen SSN early in the year. The victim may be unaware of this until he or she tries to file their taxes and learns that the return already has been filed using their SSN.

The IRS recognizes that tax preparers play a critical role in assisting clients, both individuals and businesses, who are victims of tax-related identity theft. Tax preparers can visit the IRS webpage, Identity Theft Information for Tax Preparers, to review the warning signs of tax-related identity theft and steps to take to help resolve the situation.

If your client is a data breach victim, the IRS recommends that you determine what type of Personally Identifiable Information (PII) has been lost or stolen. It is important to know what kind of information has been stolen so the appropriate steps can be taken. For example, a stolen credit card number will not affect the victim’s IRS tax account.

Also, stay in touch with the company that lost the data. Companies sometimes offer special services, such as credit monitoring services, to assist victims. For example, an announcement on the Anthem website states that Anthem is working with AllClear ID, an identity protection provider, to offer identity theft repair and credit monitoring services.

If your client’s SSN has been compromised, whether from a data breach, computer hack or stolen wallet, and they have reason to believe they are at risk for tax-related identity theft, the IRS recommends that tax preparers proceed as follows:

If your client received an IRS notice, respond immediately to the telephone number provided.

Complete Form 14039, Identity Theft Affidavit, and fax or mail it to the IRS according to the instructions on the form.

To inquire about specific client return information, you must have a power of attorney on file, and you must authenticate your identity with the IRS customer service representative.

For identity theft victims who have previously been in contact with the IRS and have not achieved a resolution, contact the IRS Identity Protection Specialized Unit at 800-908-4490.

The IRS reminds tax preparers to be aware that their business can also become a target for criminals, and to be sure to follow IRS guidelines for protecting taxpayer information. Online providers must report unauthorized disclosures within one business day. Tax preparers can also refer to these IRS resources:

What Your Client Can Do

Taxpayers should take the following steps if they become victims of identity theft:

  • File a report with law enforcement.
  • Report identity theft at the Federal Trade Commission Complaint Assistant, and learn how to respond to it at www.identitytheft.gov.
  • Contact one of the three major credit bureaus to place a “fraud alert” on credit records: Equifax, www.Equifax.com, 800-525-6285; Experian, www.Experian.com, 888-397-3742; TransUnion, www.TransUnion.com, 800-680-7289
  • Contact financial institutions, and close any accounts opened without permission or tampered with.
  • Check Social Security Administration earnings statement annually. You can create an account online at www.ssa.gov.