February 7, 2014

Avoid Identity Theft Tax Troubles

Holland & Knight Tax Compliance Blog
Kevin E. Packman

Anyone can become a victim of identity theft, and it can happen anywhere. Michael Stores, Neiman Marcus and Target are simply the latest merchants to report that customer information was stolen. While being a victim of identity theft has many costs, it is hard to imagine anyone paying a larger price than Carlos Gomez. As the Miami Herald reported Gomez was arrested on money laundering charges, spent two weeks in a Federal detention, and another seven months under house arrest. It then took close to a year for Federal prosecutors to acknowledge that they arrested the wrong man.

On January 28, 2014, the IRS announced that it was starting a pilot program for taxpayers who live in Florida, Georgia and the District of Columbia. In announcing the program, the IRS indicated that it picked these jurisdictions because these locations have "the highest per-capita percentage of tax related identity theft."

Under the program, taxpayers will receive an Identity Protection PIN. The PIN is a six digit number that the IRS will not issue unless a taxpayer has satisfied the verification process. Once the PIN has been issued, the taxpayer uses it when e-filing. Although the IRS indicates that filing a return without a PIN should not slow down the processing of the return, it does affirmatively state that using the PIN will allow individuals "to avoid delays in filing returns and receiving refunds." Anyone who has been a victim of identity theft knows first hand that achieving a resolution is a slow process. If the taxpayer was expecting a refund, it can take years until the refund is released. Al Sunshine from CBS Miami wrote about the frustration victims of identity theft have encountered when dealing with the IRS. Thus, taxpayers residing in Florida, Georgia or the District of Colombia would be well advised to consider obtaining a PIN.

If taxpayers have questions on the pilot program, the IRS has released guidance in the form of Frequently Asked Questions.

In an effort to help taxpayers avoid becoming a victim of identity theft and provide victims with assistance, the IRS has released a great deal of resources:

Taxpayer Guide to Identity Theft 

Identity Protection

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