Bonnie Lee founded Taxpertise in 1982 to represent taxpayers in audits, offers in compromise, tax problem resolution, tax preparation, tax planning, and to help non-filers safely re-enter the tax system. She is the author of "Taxpertise, The Complete Book of Dirty Little Secrets and Hidden Deductions for Small Business that the IRS Doesn’t Want You to Know.” Her office is at 450 2nd Street West, Sonoma, CA 95476 Contact her at 935.1755 or [email protected]
Stolen identity and tax issues
Dear Bonnie: I got a letter from the IRS saying that I forgot to include a W2 on my tax return from some place I never even heard of. Do I have to declare this income and pay the taxes on it? It’s for $33,000 and there wasn’t even any withholding. Hey, I wouldn’t mind paying the taxes if I had all that money! – Vivian, Sonoma
Dear Vivian: My first thought is that you’re the victim of identity theft. An identity thief will do more than just drain your financial accounts, run up your credit cards, and wreck your credit. She will use your Social Security number to obtain employment then commit tax fraud by filing income tax returns to get refunds which invariably include bogus tax credits. Or sometimes, like in your case, the thief may be an illegal immigrant or someone with another motive to use your Social Security number to gain employment.
Before panicking, check with your employer to make sure that the company you work for didn’t change hands. If it had, the new company may have issued this W2. Call the company listed on the W2 to verify. If your identity has been ripped off, then take the following steps:
Filing a police report and a theft report to the Federal Trade Commission
Placing a fraud alert on your credit reports
Closing any accounts listed on your credit report that were not opened with your permission
You must also contact the Internal Revenue Service. Since the tip-off came in the form of a letter from the IRS, contact the author of the letter you received. They will help you resolve this situation.
Tip to the general public: If you have not heard from the IRS but believe you are the victim of identity theft, you should contact the IRS Identity Protection Specialized Unit at 1.800.908.4490. You will be required to provide the IRS with proof of your identity. Submit a copy of your social security card, driver’s license or passport along with a copy of a police report and a completed IRS Identity Theft Affidavit – Form 14039 available at www.irs.gov. You can mail this information to the IRS at: Internal Revenue Service, P.O. Box 9039, Andover, MA 01810-0939 or you can fax it to 1.978.247.9965.
I know of a literary agent who was the victim of identity theft many years ago. It created a huge tax problem for her. The IRS billed her for income generated that she did not receive. The IRS then audited her books and records for several years in an attempt to sort out her true liability. She had to hire an attorney to help her and the cost was staggering. By notifying the IRS of an identity theft as soon as it occurs, even if no tax documents appear to be involved, steps can be taken to avoid this unhappy and expensive circumstance.
