Identity theft is a serious disruption to the life of anyone it touches. Your credit score, bank account, and more are at risk. What you may not realize is that someone could file a fraudulent tax return using your information.
This past tax season, there were several news outlets telling people who expected refunds to file as early as possible because the previous year some taxpayers learned the hard way that someone was there ahead of them. Unscrupulous people filed false tax returns and stole refunds. Once the refund is paid, it’s gone.
The IRS has had an identity fraud plan in place for some time, but now it’s getting a little more attention. You may have already experienced their activity in the form of Letter 5071C.
Why You Might Receive Letter 5071C
Sometimes the IRS detects something unusual in a return filed in your name. This is generally the best thing that can happen because the agency won’t send any refunds until everything is straightened out. It may also catch it, if in a delayed fashion when you send it through the regular mail. They notice there is already a return in your name and determine there may be an issue.
If the IRS finds suspicious activity indicating potential tax fraud due to identity theft, they send a letter asking you to confirm your identity. It’s called IRS Letter 5071C.
What Is IRS Letter 5071C?
Letter 5071C is how the IRS asks you to verify your identity so they can process your federal return. You can receive one whether you filed a return or not. The letter explains everything you need to do to get things squared away.
- Contact the IRS online or by phone.
- Have copies of your 5071C letter, the referenced tax return, your tax return from the previous year.
- Provide the supporting documents used to file each return.
The IRS provides a secure identity verification service so you can take care of this as quickly as possible. If you do not have internet access, you still do this by mail or in person, but it will take a little longer.
What You Need to Use the Online Service
According to the IRS, you can opt out at any time while registering to use the service and call them instead.
To register and use the service you need the following:
- Your social security number and your date of birth.
- The filing status and mailing address from the previous year’s return, even if it doesn’t match this year’s return.
- Access to your email account.
- A personal account number from a mortgage, credit card, home equity loan, student loan, car loan, or home equity line of credit.
- A mobile phone in your name.
- A copy of your 5071C letter.
- A copy of the tax return from the year listed in the letter. Not a form W-2 or 1099, your tax return.
Get all these things together before getting online so you can get everything over with quickly and without losing a step. Now you are ready to verify that you’re you.
The website will ask you to enter your old address if you are filing with a new one. You also need the filing status of your previous return. If this is your first tax return, you can select an option that says, “I have not filed a tax return in the past seven years.”
If you decide to use the toll-free phone number, you still need to have a copy of your 5071C letter and the income tax return it lists as well as any return from a previous year and the supporting documentation for the returns.
If you are unable to verify your identity sufficiently, the IRS may ask you to make an appointment with your local IRS office to verify in person.
5071C vs. 4883C vs. 5747C
The IRS has lots of different letters they send for various reasons. There are a couple that sound like a 5071C but are for other purposes.
- 5071C is sent when the IRS detects the potential for identity theft and a fraudulent return. It doesn't mean identity theft has been confirmed, it's merely a suspicion.
- 4883C is sent when the IRS simply needs more information about the return you sent. Maybe you forgot to dot an i or cross a t. It doesn’t signal that you did anything illegal.
- 5747C is sent to victims of a data breach.
To be clear, receiving Letter 5071C doesn’t mean identity theft has occurred, but because something was off about a return sent under your social security number, the IRS just wants another step of identity verification before they send a refund.
How Do You Learn about Tax Fraud via Identity Theft?
You can find out quickly that someone else has used your social security number to file for a refund when you file electronically. You receive immediate notification that a return has already been submitted under that social security number. If you file your return the old-fashioned way (by postal service), you won’t find out for weeks that there’s a problem, especially at the height of tax season.
You may also learn if you are notified that you owe additional tax, have a refund offset, or have had collection actions taken against you for a year you did not file a return. Another red flag is if IRS records show that you received wages or income from an employer you didn’t work for.
Other Steps to Take if You Are a Victim of Identity Theft
The Federal Trade Commission (FTC) recommends you take these steps if you find out you are a victim of identity theft.
- File a report with the FTC.
- Contact one of the major credit bureaus: Equifax, Experian, or TransUnion.
- Close any credit or financial accounts opened by the thieves.
The IRS says to perform some additional steps if you think your SSN is compromised and you know or suspect tax fraud has been committed. Complete FORM 14039 - Identity Theft Affidavit online or in physical form if your e-file return is rejected as a duplicate. Attach it to your paper return and mail it to the IRS.
You still need to pay taxes and file a return if e-file is rejected.
If you receive Letter 5071C from the IRS it is not a scam, it is part of a program the IRS initiated to combat identity theft and tax fraud. It doesn’t mean you are in legal hot water with the agency, it simply means the IRS suspects identity theft because of a duplicate return or another issue that points to your identity being stolen.
Respond as soon as possible to get it fixed, and if it turns out your identity was stolen, take steps to resolve any issues and take the proper precautions to keep it from happening again.