By now, we probably all know someone who has had their identity stolen. Typically, we hear about fraudulent charges on a bank or credit card or maybe loans taken out under a false name. Most of the time, you can get it all sorted out, but it’s going to cost you several hours and a lot of frustration. This can be particularly troublesome when trying to buy a new home. Now there is another problem lurking for many potential homeowners – identity theft and filing a false tax return – and nothing will slow a closing down faster.
According to a Boston Globe article from February 2014, 1.6 million taxpayers were affected by identity theft in 2013 – compared with just 271,000 for all of 2010. Here’s what happens – your personal information is stolen and used to file a false tax return – normally very early in the tax filing season before people typically file their returns. The false return will list your name and social, but then use a different address (typically a PO box). The return also will list several dependants and very little income, which prompts the Earned Income Tax Credit, or other refundable tax credits, to kick in and produce a sizeable refund. Normally, we discover this is what has happened when we try to e-file a tax return, and it is rejected by the IRS because a return has already been filed using the same social. The false refund has long been paid. Throw in understaffing and funding for the IRS, and now you have a real mess on your hands. If you are trying to close on a home, the transcripts your mortgage company gets from the IRS are not going to match the income information you provide. The closing will have to be delayed.
So what do you do? The IRS has posted a lot of information related to identity theft protection. It can be found here. There are links to all sorts of questions regarding identity theft.
If you think you are at a risk for identity theft because of a lost wallet or stolen identify, then you can contact the IRS to request an Identity Protection Pin. You’ll have to sign an affidavit about the identity theft, and verify your identity. A case will be established in your name and you will receive a six-digit PIN that must be included on your tax return when filing. The IRS won’t accept any tax return in your name that does not include that unique PIN. This IRS program is still in its infancy and is only available for persons in which their identity has been stolen or possibly stolen. However, if you lived in Florida, Georgia or the District of Columbia in 2012, you can enroll in the 2014 IP PIN Pilot program and obtain a PIN before filing your 2014 tax return.
Remember, the IRS will NEVER contact you by phone, email, text or social media to request personal or financial information. All legitimate communication will come from them in the form of a letter. If you do think you are the victim of identity theft, immediately contact the IRS Identity Protection Specialized Unit at 1-800-908-4490.
1889 General George Patton Drive, Suite 200
Franklin, TN 37067