IRS Identifies Tax Fraud Red Flags To Help Your Tax Professional Defend Against Data Theft

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The Internal Revenue Service, state tax agencies and the tax industry are working together as the Security Summit to urge tax professionals to learn the signs of data theft in order to quickly protect their clients. Tax professionals must contact the IRS immediately if an identity theft issue is suspected, while also contacting insurance or cybersecurity experts to assist them with determining the cause and extent of the loss.

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The IRS said to look for these red flags:

  • Client e-filed returns are rejected because their Social Security number was already used on another return
  • More e-file acknowledgments are received than returns filed
  • Clients responded to emails the tax pro didn’t send
  • Slow or unexpected computer or network responsiveness such as software or actions take longer to process than usual, computer cursor moves or changes numbers without touching the mouse or keyboard or being unexpectedly locked out of a network or computer
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Tax professionals should also watch out if their clients report receiving the following:

  • IRS Authentication letters (5071C, 6331C, 4883C, 5747C) even though they haven’t filed a return
  • A refund even though they haven’t filed a return
  • A tax transcript they didn’t request
  • Emails or calls from the tax pro that they didn’t initiate
  • A notice that someone created an IRS online account for the taxpayer without their consent
  • A notice the taxpayer wasn’t expecting that someone accessed their IRS online account, the IRS disabled their online account or balance due or other notices from the IRS that are not correct based on a return filed or if a return had not been filed

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If a tax pro is the victim of data theft, then it should be immediately reported to the local IRS Stakeholder Liaison and emailed to the Federation of Tax Administrators at StateAlert@taxadmin.org. Tax pros should be proactive with clients who could have been impacted, the IRS said, suggesting appropriate actions such as obtaining an IP PIN or completing a Form 14039, Identity Theft Affidavit, if applicable.

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About the Author

Josephine Nesbit is a freelance writer specializing in real estate and personal finance. She grew up in New England but is now based out of Ohio where she attended The Ohio State University and lives with her two toddlers and fiancé. Her work has appeared in print and online publications such as Fox Business and Scotsman Guide.

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