Still waiting to hear how this all turned out Page 109 Executive Summary In 2013 IRS told congress the only way to slow down refund fraud was to do the following: Delay filing season Quicker document verification Later issuance of refunds Still waiting to hear how this all turned out 04: Tax Identity Theft

Executive Summary REALITY OF SITUATION Page 109 Executive Summary REALITY OF SITUATION While IRS has stepped up their efforts the fraudsters sophistication grows faster than IRS ability to identify. The ATM of the US tax systems seems to be slowing. 04: Tax Identity Theft

Executive Summary IRS did the following in 2017 processing season: Page 109 Executive Summary IRS did the following in 2017 processing season: W-2 verification project – Voluntary Additional data elements Information sharing with partners Education and Outreach Partnering with 23 states to identity fraudulent returns (drivers license database) 04: Tax Identity Theft

Page 109 Executive Summary Collection of Driver’s License Information by Practitioners Many practitioners are skeptical and clients even more so, but Alabama, New York and Ohio require it. A significant number of other states insist it solidifies the security profile of the return and helps speed up the refund process. The primary assumption in the industry is the practice will only increase. 04: Tax Identity Theft

Executive Summary Driver’s License Some industry discussions Page 109-Bonus Executive Summary Driver’s License Some industry discussions blog.aicpa.org/2017/03/heres-the-skinny-on-drivers-license-information-for-state-tax-returns.html journalofaccountancy.com/news/2017/feb/drivers-license-information-on-state-returns-201715949.html irs.gov/individuals/new-security-safeguards ustaxhelp.com/2017/02/the-irs-requires-taxpayers-to-provide-drivers-license-information-when-e-filing-taxes/ 04: Tax Identity Theft

Page 111 Executive Summary Taxpayers are turning to their tax professionals to assist with protecting themselves from fraud: 04: Tax Identity Theft

Page 111 Executive Summary optoutprescreen.com 04: Tax Identity Theft

Page 111 Executive Summary optoutprescreen.com 04: Tax Identity Theft

Page 111-112 Executive Summary Taxpayers are turning to their tax professionals to assist with protecting themselves from fraud: 04: Tax Identity Theft

Page 112 Executive Summary IRS Resources 04: Tax Identity Theft

Executive Summary The Summary of IRS Identity Case Management Page 112-113 Executive Summary The Summary of IRS Identity Case Management Fail to handle in a timely fashion Limited communication to victims Poor processing of identified returns Poor organization of IRS guidelines in IRM Poor use of information gathered from prior cases. 04: Tax Identity Theft

How to Identify if an Individual is a Victim of ID Theft Page 113 How to Identify if an Individual is a Victim of ID Theft Warning Signs Financial and medical record with unknown information. Benefits that do not match owner. Medical providers asking for information that does not match medical history. Incorrect work history, i.e. SSA-7004 Unusual and unidentified charges on bank and credit statements. 04: Tax Identity Theft

How to Identify if an Individual is a Victim of ID Theft Page 113-114 How to Identify if an Individual is a Victim of ID Theft The IRS signals we have seen through the years 04: Tax Identity Theft

How to Identify if an Individual is a Victim of ID Theft Page 114 How to Identify if an Individual is a Victim of ID Theft Some of the new twists we are seeing: Closed Business communications. Individual information on business accounts that never employed the individual. Unexpected unpaid taxes. Original returns processed as amended A corporate entity springs suddenly back to life. 04: Tax Identity Theft

Dealing with IRS for Tax Account Fraud Page 114 Dealing with IRS for Tax Account Fraud The IRS says/asks that the following should occur: Upon discovery of Tax Refund Fraud, file Form 14039. Respond to any IRS notice ASAP. File taxes as required. Visit irs.gov/identity theft to determine current issues. Updated address irs.gov/individuals/identity-protection 04: Tax Identity Theft

Dealing with IRS for Tax Account Fraud Page 114 Dealing with IRS for Tax Account Fraud In the IRS Information and guidance additional recommendations provided will be: File a FTC report (go to identitytheft.gov/?utm_source=takeaction 04: Tax Identity Theft

Dealing with IRS for Tax Account Fraud Page 114 Dealing with IRS for Tax Account Fraud In the IRS Information and guidance additional recommendations provided will be: File a report with the local police 04: Tax Identity Theft

Dealing with IRS for Tax Account Fraud Page 114 Dealing with IRS for Tax Account Fraud The IRS response will be: Confirm/Process Form 14039 (new fax number for submission is 855-807-5720) Taxpayer account will be coded to indicate a report of identity theft. 04: Tax Identity Theft

Dealing with IRS for Tax Account Fraud Page 114 Dealing with IRS for Tax Account Fraud The IRS response will be: Reconcile the account to reflect valid return information. Place a theft indicator on the account (IP PIN requirement) if the IRS determines it necessary. Place a hold for all communication during the investigation. 04: Tax Identity Theft

Dealing with IRS for Tax Account Fraud Page 115 Dealing with IRS for Tax Account Fraud Our role in the process: Determine if it is best to file Form 14039 now or later. Review the event with the client. Obtain an engagement for the theft issues. Obtain Form 2848 – IRS can be difficult here. Make your best attempt to get a transcript. Review transcripts to identify fraudulent activity. 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 115 The Notices Used by IRS for Identity Theft IRS uses a variety of notices and occasionally a new one will appear, look on Basic Tools for Tax Professional, Understanding your Notice. LT 5071C 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 115 The Notices Used by IRS for Identity Theft Letter 5071C Go to idverify.irs.gov – Not currently available all service has been moved to telephone support only, not likely to return as has been closed since August of 2016 Call 800-830-5084 – Long waits and lots of questions, have return information available to discuss Only individuals who have received LT5071C or LT4883C will be assisted on above number 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 The Notices Used by IRS for Identity Theft LT5073C – IRS confirmation of identity theft report Oops cannot find this one on irs.gov Normally a response to Form 14039 filing May be a response of IRS identification of an ID Theft Issue 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 There is no information from the IRS currently available on this notice. 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 The Notices Used by IRS for Identity Theft LT4883C – IRS needs a response Call the idverify number of 800-830-5084 Prior year return data will be needed to verify authorized individual This was not the taxpayer’s return that generated this letter. 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 The Notices Used by IRS for Identity Theft LT4310C – IRS has identified possible ID Theft using one of its identification techniques No need to contact IRS IRS now acknowledges this notice 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 The Notices Used by IRS for Identity Theft LT239C – IRS thinks the taxpayer is a victim and has placed an indicator on the account Issues: IRS has committed the taxpayer to the ID Fraud procedures. If IRS is right great, if they are wrong a mess. No help on irs.gov available they do not acknowledge the notice. 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 The Notices Used by IRS for Identity Theft The IP PIN Family of Notices – CP01 The IRS has confirmed the placement of the IP PIN indicator on the account. For the current year and the next an IP PIN must be entered on return 04: Tax Identity Theft

The Notices Used by IRS for Identity Theft Page 116 The Notices Used by IRS for Identity Theft The IP PIN Family of Notices – CP01A The annual notification of the IP PIN, the taxpayer will be assigned a new IP PIN EVERY YEAR 04: Tax Identity Theft

The Notices Used by IRS for Tax Identity Theft Page 116 The Notices Used by IRS for Tax Identity Theft The IP PIN Family of Notices – CP01B The return was filed with an IP PIN and IRS needs more info – The taxpayer must contact IRS or return will not be processed. 04: Tax Identity Theft

The Notices Used by IRS for Tax Identity Theft Page 116 The Notices Used by IRS for Tax Identity Theft The IP PIN Family of Notices – CP01C Theft information has been received and processed by IRS. An indicator has been attached to the account. 04: Tax Identity Theft

The Notices Used by IRS for Tax Identity Theft Page 117 The Notices Used by IRS for Tax Identity Theft The IP PIN Family of Notices – CP01F The IRS is asking the taxpayer to join the IP PIN family for reasons other than tax identity theft 04: Tax Identity Theft

The Notices Used by IRS for Tax Identity Theft Page 117 The Notices Used by IRS for Tax Identity Theft The IP PIN Family of Notices – CP01H The IRS has been notified (generally the SSA) that the taxpayer is deceased and IRS will not process the return 04: Tax Identity Theft

The Notices Used by IRS for Tax Identity Theft Page 117 The Notices Used by IRS for Tax Identity Theft The IP PIN Family of Notices – CP01S Acknowledgement of identity theft claim. Compromised processing will ensue from this point forward. 04: Tax Identity Theft

The Identity Protect Personal Identification Number (IP PIN) Page 117 The Identity Protect Personal Identification Number (IP PIN) The IP PIN – Once you are in you are in, no if ands or buts. The period will be 4 tax periods at least and if IRS makes a determination more. Each period should have a CP01A received by the taxpayer. 04: Tax Identity Theft

The Identity Protect Personal Identification Number (IP PIN) Page 117 The Identity Protect Personal Identification Number (IP PIN) Some pointers on the IP PIN receipt: CP01A normally is received by taxpayer between 12/24 and 01/15 If there is an error on the notice call 800-908-4490 If the notice was not received or lost go to irs.gov. Register at “Secure Access” if not previously done so. Go to irs.gov/individuals/retrieve-your-ip-pin or call 800-908-4490 (21days) 04: Tax Identity Theft

The Identity Protect Personal Identification Number (IP PIN) Page 117 The Identity Protect Personal Identification Number (IP PIN) NO IP PIN and a rejection will follow Each year is a new number 04: Tax Identity Theft

The Identity Protect Personal Identification Number (IP PIN) Page 118-119 The Identity Protect Personal Identification Number (IP PIN) Some issues: CP01A fails to arrive Get it replaced by calling IRS at 800-908-4490 Go to irs.gov/individuals/get-an-identity-protection-pin 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 119 A helpful piece of information for the taxpayer is a copy of the “fraudulent” return(s). Why? Local law enforcement will use to pursue the case. BUT IRS will decline to release until the investigation is complete. Why? To insure the requester of the “fraudulent” returns is in fact the injured taxpayer. 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 119 The procedures for obtaining the “bad return” , under Program Manager Technical Advice 2015-019 are specific and the request must include: Name and Social Security Number Mailing Address Tax year or years requested, and The statement “I declare I am the taxpayer under penalties of perjury.”. A copy of a government issued photo ID. 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 119 A person who makes the request, a POA, for the return must also: Indicate their name and FEIN. Relationship to the identity theft victim. Mailing Address. CAF number. The statement “I declare that I am the person authorized to obtain the information requested”. 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 120 There are some additional steps that must be followed by the “victim” of the theft: A copy of a government issued ID with a picture. Per the prior statement a copy of the Form 2848 if it applies The request must be sent to: IRS; PO Box 9039: Andover, MA 01810-0939 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 120 The IRS continues to insist that they not only are required to protect the identity of the injured taxpayer but that of the scammer. However, Chief Counsel’s office says: The fraudulent return is a nullity, as it does not qualify as a return per IRC 6103 BUT still is subject to disclosure restrictions of IRC 6103(a). IRS 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 120 Okay the taxpayer can get part of the return pursuant to the IRS’s ability to share information used in processing the T/P’s return. 04: Tax Identity Theft

Obtaining a Copy of the Fraudulent Returns Filed Using the Taxpayer Account Page 120 Some closing issues for working with the IRS: No copy of the return for stolen dependent’s information, the taxpayer/spouse must be listed on return to permit disclosure under IRC 6103(a). The process is completely frustrating because: It takes a long time. and IRS seems to care more for the bad guy than the T/P. 04: Tax Identity Theft

Protecting your Tax Data Page 120 Protecting your Tax Data What the IRS says: Don’t respond to e-mails with IRS in the from field Check out your tax preparer Secure your return If you are hiring a preparer to do your taxes, ask the preparer what systems he or she has in place to keep your physical paperwork and your electronic data safe. 04: Tax Identity Theft

What Kind of Resources are Available Page 121 What Kind of Resources are Available When faced with the problem: IRS Identity Protection Specialized Unit – Overloaded but they can help. Taxpayer Advocate Service – A final cry if IRS has failed your client Federal Trade Commission – Can help law enforcement link the threads together 04: Tax Identity Theft

What Kind of Resources are Available Page 122 The IRS Guide to Identity Theft: 04: Tax Identity Theft

Bonus - Some Additional Steps Page 109-122 Consider these steps also: File Form 8822 to insure IRS’s file reflects the correct address. Obtain a transcript of the following if possible: Account Transcript Wage & Income Transcript Return Transcript Try not to file Form 14039 until it is clear it will be helpful to your client. 04: Tax Identity Theft

Tax Identity Theft is Spreading Tax identity theft is no longer a problem for our client’s refund but an industry wide problem that is affecting every aspect of tax filing: By a show of hands: Our firm has had greater than 10% of our clients directly affected by identity theft. Our firm has experienced theft of client records. Our firm has purchased data breach coverage. When a client encounters tax identity theft we counsel them on how to deal with the theft in addition to the tax filing issues. 04: Tax Identity Theft