REMINDER!

Second Quarter Estimated Tax Payments are due 6/17 

For any of our clients that pay estimated taxes, a reminder that voucher 2 is due June 17, 2013.  These vouchers were sent to you along with your 2012 income tax returns.  If you need a replacement copy, please contact us and we would be happy to provide you with one.

Identity theft has been on the rise over the past few years with regard to tax return filing, and the IRS has certain procedures in place to help prevent it. We, at C&L, have seen several cases affecting our clients and have also seen stepped up measures by the IRS in the form of verification letters when large or unusual transactions are reported on an individual's return.

The most common form of identity theft encountered by the IRS involves a situation where a taxpayer's Social Security number is stolen and used to file a tax return claiming a fraudulent refund. When the legitimate taxpayer files his or her return, the IRS will reject it. The legitimate taxpayer must correct the situation in order to obtain his or her refund, which in many cases can take a considerable amount of time and effort on the taxpayer's part.

The IRS is also seeing an increased amount of business taxpayer identity theft. Generally, business taxpayer identity theft involves fraudulent use of a business's employer identification number (EIN) to file business returns claiming fraudulent refundable credits, or to file Forms W-2 and 941 to support individual identity theft efforts.

The IRS recommends that individual taxpayers whose financial information has been compromised should immediately submit a Form 14039, Affidavit of Identity Theft, to the IRS, even if they do not yet have a tax problem. Upon receipt of a Form 14039, the IRS will immediately flag the taxpayer's account as being at risk of identity theft. 

Taxpayers can help the IRS by reporting instances of credit card fraud or other type of identity theft committed against them on Form 14039, even if the taxpayer is unsure that this fraud will result in a tax problem. Once the IRS receives that information, it can enter it into its filters and place a marker on the taxpayer's account.

The information reported on Form 14039 enables the IRS to be more effective at identifying taxpayer accounts at risk of identity theft and stopping issuance of fraudulent refunds. Ideally, the IRS would be able to stop a fraudulent return from ever being processed.

Another measure of protection includes issuance to certain taxpayers of a number that replaces their compromised Social Security number. This number is called the Identity Protection Personal Identification Number (IP PIN). The IRS issues IP PINs to certain taxpayers whose accounts have been flagged with an identity theft indicator. The six-digit IP PIN must be used on the taxpayer's tax return or the return will be rejected. For every tax year that the identity theft indicator remains on the account, the taxpayer will receive a new IP PIN. A taxpayer may not use the IP PIN issued for previous tax years.

A taxpayer who has been assigned an IP PIN will receive two notices in the mail from the IRS. The first will arrive in early to mid-November, and tells the taxpayer to expect receipt of his or her IP PIN number in the mail in December. The second notice contains the IP PIN itself. A taxpayer cannot file electronically without this IP PIN, nor can the taxpayer receive this particular IP PIN from any other source if it is lost.

The IRS was also working to reduce the number of times a Social Security number appeared on its official notices and forms.Many of the IRS notices have already replaced a taxpayer's Social Security number with a two-dimensional bar code.

In other instances, such as the Notice of Federal Tax Lien, the IRS had simply truncated the Social Security number so that all that appears are the last four digits. However, for documents such as a statutory notice of deficiency or a Collection Due Process notice, the appearance of the Social Security number is required by law and can only be removed by an act of Congress.

Hopefully these measures can help protect you from identity theft in the future. The best thing is to be aware of the problem and properly dispose of any personal financial information by shredding it. If you do believe your information has been compromised, please contact us and we can help you with notifying the IRS.