Recently, the IRS, state tax agencies, and the U.S. tax industry hosted a Security Summit to help taxpayers combat identity theft refund fraud. In this article, we’ll share our top takeaways from the Summit as well as a few other red flags and best practices to help you protect your clients’ information and your business from identity theft.
Identity Theft Red Flags
As a tax professional, you need to be vigilant while watching out for identity theft red flags, both in your business and for your clients.
Here is a list of red flags to watch out for that pertain to your business:
- Experiencing slow or unexpected computer or network responsiveness, such as software or actions taking longer than usual to process.
- Noticing the computer cursor moving or numbers changing without any input from the mouse or keyboard.
- Unexpectedly being locked out of a network or computer system.
Beware of these identity theft red flags when talking to and working on behalf of your clients:
- When a client is notified that an IRS online account was created for them, but they did not create it.
- Their IRS online account was accessed without their knowledge.
- The IRS disabled their online account.
- A client received a tax transcript that they did not request.
- Their personal information changes without the client requesting it.
- They receive incorrect balance due or other notices from the IRS, which do not match the tax return you filed on their behalf.
- When a client calls or emails you, saying they are responding to a call or email you never made.
- They receive funds without having filed a tax return.
- Receiving more e-file receipts than you actually filed.
- A client’s tax returns are rejected due to someone else already using their Social Security number on another return.
- Receiving IRS authentication letters (5071C, 6331C, 4883C, 5747C) even when no tax return has been filed.
- A client’s information return details contain discrepancies, such as income and deductions.
- Seeing a duplicate SSN or TIN on multiple returns.
- A client’s signature does not match their signature from previous returns.
How to Respond to Identity Theft Red Flags as a Tax Pro
If you suspect that your business is a victim of identity theft, then you need to carry out the following actions ASAP:
- Notify the local IRS stakeholder liaison to ensure that all of the relevant IRS offices are informed.
- Email the Federation of Tax Administrators at statealert@taxadmin.org for guidance on reporting to state tax agencies.
- Notify your state attorney general of the data breach.
- Recommend that all of your affected clients obtain an IP PIN or complete Form 14039, Identity Theft Affidavit, if necessary.
If you suspect that your client has become a victim of identity theft, it is crucial that you or your client promptly contact the IRS. Then encourage your client to seek assistance from insurance or cybersecurity professionals to determine the cause and magnitude of the damage.
eFile360 Can Help Tax Pros Avoid Identity Theft
We help tax pros like you e-file 1099, 1098, W‑2, and Affordable Care Act forms. Learn how eFile360 works at this link.
To help you and your clients avoid identity theft, we offer a TIN Checking add-on service to help you validate the recipient’s Tax ID. This service can give you and your client peace of mind.
Here’s how our TIN Checking service works: We will cross-check the tax ID and name combination to ensure accuracy. In case of any inconsistencies, we will notify you so that you can verify the details with your client and make necessary corrections. Once the information is corrected, we will conduct another verification on your behalf. If everything aligns correctly, we proceed with e-filing your form.
In addition to our TIN Checking service, we prioritize security. When you create a free eFile360 account, you can rest assured that your clients’ information is protected from prying eyes with continuous security monitoring with SiteLock and two encryption methods – Transport Layer Security for data in transit and Transport Data Encryption for data storage.