Nobody likes paying taxes; it’s just one of those things that has to be done. Besides, there’s often the prospect of a nice refund to invest or to spend on something fun. It’s what financial advisors call “forced savings” — you’re just getting your own money back — but if you struggle to save, as many people do, it’s a useful way to accumulate a lump sum every year.
That’s why it’s especially galling to discover that a scammer has already filed a tax return in your name, and has claimed the refund you’d worked so hard to earn. That’s just one of many forms of tax fraud you might encounter in your lifetime, and most of them are costly and inconvenient. If it should happen to you, you’ll need to know how to report someone to the IRS.
Signs of Tax-Related Fraud or Identity Theft
Tax fraud can take a number of different forms, and there’s a correspondingly long list of signs that it has taken place. Aside from being told you’ve already filed (when you haven’t), some of the others include:
- Getting a notice that an online tax account has been set up, when you haven’t done so
- Getting a notice that your account has been disabled, when you haven’t done so
- Getting a notice from the IRS that you failed to declare income from an employer you haven’t worked for
- Getting a notice that the dependent you’re claiming on your taxes has already been claimed on someone else’s return
There’s a fuller list of potential danger signs on the IRS’ own Taxpayer Guide to Identity Theft page, but the common theme is clear enough: things are happening with your account without your knowledge or consent.
If your Social Security number fell into the wrong hands, for example, scammers might combine it with other people’s personal information to create a “synthetic” identity. That fake person could then get a job under another name but file using your SSN, which means you won’t then be able to file. Alternatively, thieves might steal your minor child’s SSN and claim that deduction themselves. The possibilities are endless.
How to Report Someone to the IRS
First and foremost, you’ll still need to file your own return on time and continue to pay your taxes. If you’ve discovered the (likely) fraud because you were unable to e-file your return, that means you’ll need to file the old-fashioned way: on paper. Download and complete a copy of IRS Form 14039, the Identity Theft Affidavit, and attach it to your physical return. Mail the completed return to the regional IRS processing center that’s appropriate for your location.
A lot of things start happening once the IRS receives your return. First, they’ll mail you an acknowledgement that they’ve received your return and your affidavit and that they’ve launched an investigation. That investigation will look at, among other things:
- Whether it’s just the current year that’s affected or other years as well
- Whether you’re the only taxpayer affected (a synthetic identity might use identifying information from additional people)
- Verifying all of the personal information involved
- Verifying the refund you were actually entitled to, if applicable
- Issuing your refund (yay!)
- Marking your file as having been affected by identity theft, which helps safeguard you from future incidents
The entire process usually takes about 120 days, but if your taxes are relatively complex it can take up to 180 days to come to a full resolution. You won’t get to see the details of the fraudulent return initially, because of privacy concerns: The IRS needs to be sure your complaint is legitimate, or else letting you see a disputed return that someone else filed would itself be a security breach.
Another common form of identity-theft-related tax fraud sees the scammers claiming unemployment benefits in your name. This particular fraud became a gold mine for scammers during the COVID pandemic, when large numbers of workers were laid off, terminated or placed on furlough. It’s a particularly nasty crime, because when you need unemployment benefits you really need them.
Benefits are treated as taxable income, so you’ll often learn you’ve been the victim of this particular crime when you receive a 1099-G showing income from a fraudulent claim in your name. Because benefits are managed at the state level, you’ll need to report the case in the state where it occurred, as opposed to contacting the IRS directly. The Department of Labor provides a useful guide to that process.
The specific steps you need to take, and the time required to reach a resolution, will vary between states. If tax season rolls around in the meantime, file a return reporting only the income you’ve legitimately received. Eventually you’ll receive a corrected 1099-G, and at that point — if necessary — your return can be adjusted retroactively.
Reporting Other Forms of Tax Fraud
There are other forms of tax fraud that don’t fit neatly into the “steal an identity, file a return” category. Those might include concerns about a shady tax preparer, a scammer promising to reduce your taxes. You may not even need to be the victim: Perhaps you’ve realized that your employer or a business you have dealings with is dodging its share of taxes.
The IRS doesn’t take phoned-in reports for cases like that. Instead, you’ll find a list of appropriate forms on the agency’s tax-fraud reporting page. A few examples include:
- Form 3949-A, Information Referral, for general forms of tax fraud like unreported income, falsified documents, bogus deductions or outright failure to pay taxes
- Form 13909 for fraud committed by tax-exempt organizations
- For misconduct by tax preparers, depending on the type of complaint, you might use Form 14157, Form 14157-A (which accompanies Form 14157 for some complaints) or Form 14242
Because tax-avoidance schemes are a constant drain on government revenues (and therefore a burden to all taxpayers), in some circumstances the IRS may pay out a cash award to whistleblowers. If you’re eligible for such an award, you’ll have the happy duty of completing Form 211, Application for Award for Original Information.
Responding to a Letter 4883C
Sometimes the shoe will be on the other foot: Instead of you contacting the IRS to report tax fraud, the agency will reach out to you. If the IRS’ own internal security checks pick up on a potential case of fraud involving your return, you’ll receive a Letter 4883C in the mail.
The letter lets you know that the IRS needs you to verify your identity, and requests that you call a toll-free number. Before you pick up the phone, you’ll need to gather up your copy of the return they’re inquiring about, as well as a previous year’s return for validation purposes. You’ll also need any supporting forms or schedules that accompanied either of those returns when they were filed.
This may be your first inkling that you’ve been the victim of identity theft or, if you knew there was a problem, just one more thing piled onto an already-full plate. Either way, you should take appropriate steps to minimize the damage caused by identity theft.
Taking the Next Steps
There are a number of additional steps you should take after reaching out to the IRS (or them reaching out to you). One is setting up an Identity Protection PIN on your IRS account, to help prevent future incidents. You’ll be issued a new 6-digit PIN for every tax season, and without that PIN nobody can access your IRS account. You can (and should) also change the password on your IRS account, and set up multi factor authorization — usually in the form of a code that’s texted to your phone number of record — as an additional security measure.
Aside from managing the tax-specific aspects of your case with the IRS (and state tax authorities, if your state taxes are also affected), you’ll need to follow the same steps as any other identity-theft victim. First and foremost, that means reporting your case to the FTC’s IdentityTheft.gov website. Not only does that make it official, the site will walk you through the creation of a recovery plan that’s tailored to your specific circumstances.
The plan provides a checklist that guides you through notifying the major credit-reporting agencies, placing a credit freeze or fraud alert with them, contacting any creditor or merchant that’s been defrauded by the identity thief and just generally doing what you need to do to clean up the mess your scammer has caused.
The Bottom Line
There’s no way around it, identity theft (in any form) is a massive inconvenience. Surprisingly, dealing with the IRS may not be the most unpleasant part of the whole exercise or take the longest to resolve. While it’s a large and bureaucratic agency, it’s also tightly focused, so once you complete the correct forms you’ll have little to do but wait for the system to grind its way to a resolution.
IRS investigations are usually completed in four months or less, or up to 180 days in complex situations. Other aspects of identity theft can take longer to clear up (sometimes a lot longer), and require a lot more hands-on involvement. On the whole it would be better to avoid identity theft in the first place, but — when necessary — sorting things out with the IRS is relatively straightforward.
- US Internal Revenue Service: Taxpayer Guide to Identity Theft
- US Internal Revenue Service: Form 14039, Identity Theft Affidavit
- US Internal Revenue Service: How Do You Report Suspected Tax Fraud Activity?
- US Internal Revenue Service: Form 3949-A, Information Referral
- US Internal Revenue Service: Form 13909, Tax-Exempt Organization Complaint (Referral)
- US Internal Revenue Service: Form 14157, Return Preparer Complaint
- US Internal Revenue Service: Form 14157-A, Tax Return Preparer Fraud or Misconduct Affidavit
- US Internal Revenue Service: Form 14142, Report Suspected Abusive Tax Promotions or Preparers
- US Internal Revenue Service: Form 211, Application for Award for Original Information
- US Internal Revenue Service: Understanding Your Letter 4883C or 6330C
- US Bureau of Labor: Report Unemployment Identity Theft
- IdentityTheft.gov: Report Identity Theft and Get a Recovery Plan