The IRS appears to be making inroads in addressing tax-related identity theft, although the crime continues to feature prominently on its annual Dirty Dozen list of tax scams (IR-2019-49, http://bit.ly/32UqCrH), along with phishing and phone scams. The Treasury Inspector General for Tax Administration (TIGTA) report on the “Interim Results of the 2019 Filing Season” (Ref. No. 2019-44-030, Apr. 2, 2019, http://bit.ly/2MHRDZC) indicated that IRS identity theft filters captured 3,741 identity theft returns as of February 28, in comparison to 2,204 for the same period in 2018, which may be reflected in the declining number of taxpayers initiating identity theft complaints. Participants in the 2019 Tax Software Survey (p. 16) continue to report identity theft issues, but the level has declined from previous years, with 40% reporting minor or significant problems in 2019 as compared to more than 50% in 2018.
The Taxpayer First Act (Public Law 116-25, http://bit.ly/2PxH3pS), which became law on July 1, addresses identity protection, management of information technology, the use of electronic databases, and IRS customer service and enforcement procedures. Specific identity theft-related provisions include “Sensible Enforcement: Access to Tax Returns and Tax Return Information,” which prohibits an unauthorized person from examining books and records. “Cyber Security and Identity Protection” requires the IRS to set up a program under which any concerned taxpayer can request an identity protection personal identification number (IP PIN) to file tax returns. Furthermore, if an investigation has been initiated into suspected unauthorized use of taxpayer or dependent identities, the IRS is required to notify the taxpayer. The dependent identity issue is particularly important, and has been predicted to become a major problem in the not-too-distant future.
Taxpayer Advocate Service Resources
The Taxpayer Advocate Service (TAS) is an independent organization that serves as the “voice of the taxpayer” within the IRS. The TAS is probably known for its “Annual Report to Congress” and “Objectives Report to Congress,” which are available on its website (https://taxpayeradvocate.irs.gov). The recently retired National Taxpayer Advocate, Nina Olson, was the face of the TAS for 18 years and the driving force behind its annual reports, and will be greatly missed. The TAS website also offers tools for tax professionals (http://bit.ly/332WCtH), such as the opportunity to connect with the IRS through focus groups at IRS Nationwide Tax Forums.
The TAS provides many identity theft resources on its website (http://bit.ly/2JB0dHq), including information on how to know that someone is a victim of identity theft, such as when the IRS rejects an e-filed return because another return was previously received under the same Social Security number. Less well-known signs of identity theft are the receipt of an IRS notice showing wages from a previously unknown employer and the initiation of collection actions for a tax year when the taxpayer did not owe tax. Fraudulent use of someone’s Social Security number can also affect future Social Security benefits.
The “What Are My Resources?” section of the identity theft webpage presents links to more than a dozen handy tools from the IRS, the Federal Trade Commission, and the Social Security Administration. Although these are not specifically TAS resources, its website is one of the easier ways to locate the items. One useful example is “Publication 5027: Identity Theft Information for Taxpayers,” a one-page document that covers warning signs, steps to take, and how to reduce risk, with multiple hyperlinks to IRS and other websites (https://www.irs.gov/pub/irs-pdf/p5027.pdf). Form 14039: Identity Theft Affidavit is used to request that the IRS flag an account for questionable activity. Form 4506-F: Request for a Copy of a Fraudulent Tax Return allows identity theft victims to request a redacted copy of the transcript of a return filed under a stolen Social Security number.
Taxpayer First Act Resources
While reading the original legislation is useful to gain a more detailed view of any law, summaries can also be quite helpful. Not many professional resources devote extensive coverage to the administrative or procedural changes, rather than the taxation changes, in the Taxpayer First Act. The National Association of Tax Professionals offers an easy-to-read summary on its website (http://bit.ly/320Fm6T). A Don’t Mess with Taxes article, “9 Ways the IRS Reform Bill Will Help Taxpayers” is an interesting overview with many links to related resources (http://bit.ly/2WuS3pn). Taxgirl presents also a fairly extensive topical summary in “Taxpayer First Act of 2019 Aims to Improve Experiences for Taxpayers and Modernize the IRS” (http://bit.ly/2JDg3kU).
Some of the tax software providers featured in the 2019 Tax Software Survey provide publicly available Taxpayer First Act materials. For example, the Wolters Kluwer (CCH) Tax & Accounting Blog (http://news.cchgroup.com/) presents a quick summary in bullet format in “Wolters Kluwer Tax & Accounting Blog Explores the Taxpayer First Act” (http://bit.ly/2oy0tjf). “Congress Considers IRS Identity Theft Bill as Part of Taxpayer First Act” is an early look at the legislation as proposed and provides a handy overview of individual protections, disclosure safeguards and penalties, and internal IRS changes (http://bit.ly/337pBMQ).
Drake Software’s Taxing Subjects Blog (https://www.drakesoftware.com/blog) also describes the proposed version of the legislation in “New Bill Promises IRS Reform,” which includes links to related materials (http://bit.ly/2WrOQac). The blog follows up with a highlight of the provisions in “Drake IRS Reforms Signed into Law” (http://bit.ly/36fKveN). In addition, the podcast “Amanda Explains the Taxpayer First Act” summarizes five take-aways from the law in 15 minutes (http://bit.ly/322uZzx).
Thomson Reuters’s Tax & Accounting Blog (https://tax.thomsonreuters.com/blog/) presents the most coverage of the act, with multiple articles and helpful citations of the related Internal Revenue Code (IRC) provisions and other primary source tax law. “President Signs Taxpayer First Act, Fixing Effective Dates of Various Provisions” provides a fairly extensive overview of the provisions in a topical format (https://tmsnrt.rs/2JCuTIi). The best of the materials covered in this column is “Special Study of the Taxpayer First Act of 2019,” which covers the new law in detail and includes background information and references to the specific act sections and the IRC sections (https://tmsnrt.rs/2NqR9pT).
Selected Identity Theft Resources
IRS Identity Protection webpage
Form 4506-F: Request for a Copy of a Fraudulent Tax Return
Publication 5027: Identity Theft Information for Taxpayers
Form 14039: Identity Theft Affidavit
Treasury Inspector General for Tax Administration IRS Impersonation Scam Reporting