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Resolving the Theft of Tax Clients’ Identity

by Stephen Hammel, J.D., and Sebastian Murolo, CPA, MBA, CMB | Sep 11, 2015   ()

CPAs in tax practice have seen an increase in identity theft, so electronic security is now a top issue (see "2015 Tax Software Survey"). Besides causing untold misery to any taxpayer whose identity has been stolen for use on a fraudulent return, identity-theft fraud requires correcting the taxpayer's account, costing practitioners unanticipated additional time and expense at the worst possible time, when they are in the busiest time of their tax preparation cycle. Here are some tips for dealing with this vexing problem.

Upon completion of a client's tax return, preparers must receive e-file authorizations to electronically file the return. At that point, they might receive a rejection code 902 with the statement, "Taxpayer TIN [taxpayer identification number] in the return header must not be the same TIN of a previously accepted electronic return for the return type and tax period indicated in the tax return." After double-checking the Social Security number or TIN, the preparer has to contact the client, who often then indicates that he or she has not filed any paperwork with the IRS at all since last year's return. Then it becomes clear that the client may be a victim of identity-theft fraud.

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Source: The Tax Advisor
Source: The Tax Advisor

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