Tax Fraud Alert: Recently reports have begun to trickle in about taxpayers receiving IRS Letter 5071C. Letter 5071C is a standard letter issued by the IRS when it needs taxpayers to confirm personal information. If you receive Letter 5071C, there will be contact information for the agency’s new Identity Verification Service. There is a dedicated website and a dedicated phone number that will be provided in the IRS letter for this new department. Do not give out any information unless you have verified the authenticity of the letter. And never answer any questions over the phone.
Tax fraud and identity theft – everywhere you look, you see stories about it. It’s overwhelming and scary because anybody can steal your identity; all they need is your Social Security number and date of birth, and they can file a tax return in your name. So how can you protect yourself?
Never leave mail anywhere that’s not secure – take it to the post office
Don’t carry your Medicare card or Social Security card around with you
If you have a tax preparer, make sure they have a Personal Tax Identification Number (PTIN)
In rare instances, tax preparers have been caught siphoning their clients’ refunds directly into their own bank accounts. Other thieves have been so brazen that they bragged about their crimes on Facebook. Below is a quote from one such individual:
‘I’m _____, the queen of IRS tax fraud. I’m a millionaire for the record.”
Also for the record, she is now serving 21 years in federal prison.
So why does this keep happening?
The law states that the IRS must process tax returns as soon as they get them, even if your W2s and 1099s haven’t been submitted yet from your employer. As a result, if someone steals your identity and files a fraudulent tax return to try and get a refund, the IRS doesn’t have the ability to cross check your information.
If someone files a return in your name before you do, they get the refund. If the IRS waited until April 15th to process people’s returns, that would solve the issue.
I read somewhere that street crime is down because criminals are turning their attention to our tax returns. The IRS is failing, costing the federal government and taxpayers billions of dollars. They use an antiquated system to “verify” that a return is filed by the correct taxpayer, even when they don’t know for sure. Something needs to change.
Judith Heft, Principal, Judith Heft & Associates is a personal financial concierge with offices in Greenwich and Stamford. She can be contacted via email at email@example.com or by phone 203-978-1858.