Does IRS have equivalent of credit freeze?

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Theseus
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Does IRS have equivalent of credit freeze?

Post by Theseus » Thu Oct 12, 2017 6:47 pm

With all the data breaches going around I have finally frozen my credit at the three bureaus.

So I was thinking I should do the same for my tax returns as that seem to be much harder to fix if someone files a false tax return. So went looking for that on IRS site and don’t see anything like that available. Just wondering if something like that exists?

SlowMovingInvestor
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Re: Does IRS have equivalent of credit freeze?

Post by SlowMovingInvestor » Thu Oct 12, 2017 8:15 pm

You can ask the IRS for a security PIN, but not everyone is eligible to get on.

https://www.irs.gov/identity-theft-frau ... ection-pin

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oldcomputerguy
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Re: Does IRS have equivalent of credit freeze?

Post by oldcomputerguy » Thu Oct 12, 2017 8:49 pm

SlowMovingInvestor wrote:
Thu Oct 12, 2017 8:15 pm
You can ask the IRS for a security PIN, but not everyone is eligible to get on.

https://www.irs.gov/identity-theft-frau ... ection-pin
I recall reading that the IRS is limiting this at present to those who actually have been victims of identity theft, with hopes of rolling it out to everyone else later on.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

sport
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Re: Does IRS have equivalent of credit freeze?

Post by sport » Thu Oct 12, 2017 8:59 pm

It would seem that the IRS could add an entry block to the tax form where they would ask you to enter your AGI (or some other value) from your previous year's tax form. That would stop a lot of fake returns immediately. This would be an inexpensive and reliable check of the validity of a return. Why don't they do this? :annoyed

AQ
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Re: Does IRS have equivalent of credit freeze?

Post by AQ » Thu Oct 12, 2017 9:13 pm

Curious how tax-filing fraud is ever possible? The impostor not only needs your identify info, but also W-2, dividend, capital gain/loss, mortgage payment, etc., etc?

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Pajamas
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Re: Does IRS have equivalent of credit freeze?

Post by Pajamas » Thu Oct 12, 2017 9:16 pm

AQ wrote:
Thu Oct 12, 2017 9:13 pm
Curious how tax-filing fraud is ever possible? The impostor not only needs your identify info, but also W-2, dividend, capital gain/loss, mortgage payment, etc., etc?
Why would they need all that other information? They're not trying to file an accurate return, they're trying to file a return that maximizes the refund so they can pocket it.

Theseus
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Re: Does IRS have equivalent of credit freeze?

Post by Theseus » Thu Oct 12, 2017 9:20 pm

THere have been many reports (I think there was a 60 minutes story also) on scammers filing fake returns. They will use stolen ssn, name etc and they submit a return online showing that they are owed a large refund. IRS will process that and deposit the refund amount in the bank account given. Then don’t validate against W2,1099s etc. at the time of submission. If I remember correctly that happens later - if at all. But I could be wrong.

But once the false tax return is filed it is a nightmare. It is much worse to get that fixed with IRS than with the bank or the credit card company.

Theseus
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Re: Does IRS have equivalent of credit freeze?

Post by Theseus » Thu Oct 12, 2017 9:23 pm

sport wrote:
Thu Oct 12, 2017 8:59 pm
It would seem that the IRS could add an entry block to the tax form where they would ask you to enter your AGI (or some other value) from your previous year's tax form. That would stop a lot of fake returns immediately. This would be an inexpensive and reliable check of the validity of a return. Why don't they do this? :annoyed
Changing a 1040 is very difficult. I remember a PlanetMoney podcast last year where they talked about a process for adding a new item to the form but how difficult it is. I will find a link to that podcast and post it.

furwut
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Re: Does IRS have equivalent of credit freeze?

Post by furwut » Thu Oct 12, 2017 9:27 pm

AQ wrote:
Thu Oct 12, 2017 9:13 pm
Curious how tax-filing fraud is ever possible? The impostor not only needs your identify info, but also W-2, dividend, capital gain/loss, mortgage payment, etc., etc?
It could be the IRS doesn’t have the correlating data from reporters ready early in the tax season to cross-check. But they are under political pressure to quickly issue refunds.

Miakis
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Re: Does IRS have equivalent of credit freeze?

Post by Miakis » Thu Oct 12, 2017 9:57 pm

AQ wrote:
Thu Oct 12, 2017 9:13 pm
Curious how tax-filing fraud is ever possible? The impostor not only needs your identify info, but also W-2, dividend, capital gain/loss, mortgage payment, etc., etc?
You are overestimating the IRS' technology.

Fraudsters generally file false returns in January, before most info is reported and before the IRS has the capacity to match W-2s to your return.

It has tried to mitigate this by accelerating the W-2 deadline and pushing the filing season later, as well as flagging returns that are vastly different.

For instance, a person who is self-employed and owes taxes in 2016, but in 2017 has solely W-2 income and a refund runs a high risk of getting flagged for identity verification. But a person who has 200,000 in W-2 income one year and 50,000 the next is not different enough to trigger fraud alerts.

Reporting too much mortgage interest could run you into an audit; reporting too little is not of any concern to the IRS. Missing dependents or new dependents are also not a cause of concern for the IRS.

Dividends, capital gain, etc - Many brokerage firms don't get these 1099s out until late March, with corrections running late into the year. You're unlikely to even get an income discrepancy letter on these until at least a few months after the filing season. I've seen letters about missing 1099-R's and 1099-B's pop up more than 12 months after the filing date - so there seems to be virtually no real-time matching for those.

I call the IRS in a professional capacity on a regular basis. 25% or so of my calls involve computer issues on their end - their system is down, their computer has crashed, their computer is frozen, their computer is slow, they can't access certain information, mysterious software errors have prevented taxpayer information from posting correctly. I am reasonably certain that they are working on some legacy version of Windows 95.

And let's not forget that there have been well-publicized hacking incidents for the last few years. In 2014 and 2015, hackers accessed prior year transcripts. In 2016, they accessed IP PIN's. In 2017, they accessed information from financial aid applicants who were using an IRS tool to help them with the FAFSA. All this to say that even if the IRS had the ability to analyze your tax return quickly and efficiently, hackers have plenty of information to file realistic tax returns.

fourwheelcycle
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Re: Does IRS have equivalent of credit freeze?

Post by fourwheelcycle » Fri Oct 13, 2017 7:33 am

My wife and I are not eligible to request an IRS PIN, but I know our SS numbers and other info have been hacked at Equifax. What complications will we run into if we E-file a no refund 2017 joint tax return on January 26, 2018 and then file an amended return, with complete info that may or may not indicate a refund, just before April 15?

Would our early return prevent fraudsters from filing a return using our names and SS numbers after we have filed? Would we run into problems with the IRS for filing an incomplete return early and then amending it?

I imagine one problem could be that filing an obviously incomplete return might cause the IRS to put a fraud alert hold on it even if we do not claim a refund in the early return.

Theseus
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Re: Does IRS have equivalent of credit freeze?

Post by Theseus » Fri Oct 13, 2017 7:50 am

fourwheelcycle wrote:
Fri Oct 13, 2017 7:33 am
My wife and I are not eligible to request an IRS PIN, but I know our SS numbers and other info have been hacked at Equifax. What complications will we run into if we E-file a no refund 2017 joint tax return on January 26, 2018 and then file an amended return, with complete info that may or may not indicate a refund, just before April 15?

Would our early return prevent fraudsters from filing a return using our names and SS numbers after we have filed? Would we run into problems with the IRS for filing an incomplete return early and then amending it?

I imagine one problem could be that filing an obviously incomplete return might cause the IRS to put a fraud alert hold on it even if we do not claim a refund in the early return.
We are in the same boat. This is an interesting idea. When you say incomplete are you suggesting you file a return based on the information you have as of January 26? And then once all W2s,1099s, other information are in your hand you amend it?

wrongfunds
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Re: Does IRS have equivalent of credit freeze?

Post by wrongfunds » Fri Oct 13, 2017 8:15 am

sport wrote:
Thu Oct 12, 2017 8:59 pm
It would seem that the IRS could add an entry block to the tax form where they would ask you to enter your AGI (or some other value) from your previous year's tax form. That would stop a lot of fake returns immediately. This would be an inexpensive and reliable check of the validity of a return. Why don't they do this? :annoyed
I know you are doing this with your tongue firmly planted in your cheek (as IRS *does* ask you to enter your previous year's AGI!) but that mechanism is only applicable to filing online. What if the crook filed fake paper return?

montanagirl
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Re: Does IRS have equivalent of credit freeze?

Post by montanagirl » Fri Oct 13, 2017 8:47 am

fourwheelcycle wrote:
Fri Oct 13, 2017 7:33 am
My wife and I are not eligible to request an IRS PIN, but I know our SS numbers and other info have been hacked at Equifax. What complications will we run into if we E-file a no refund 2017 joint tax return on January 26, 2018 and then file an amended return, with complete info that may or may not indicate a refund, just before April 15?

Would our early return prevent fraudsters from filing a return using our names and SS numbers after we have filed? Would we run into problems with the IRS for filing an incomplete return early and then amending it?

I imagine one problem could be that filing an obviously incomplete return might cause the IRS to put a fraud alert hold on it even if we do not claim a refund in the early return.
The earlier, the better. The fraudsters are mainly using fake info to get child tax credit and EIC money. Any refundable credits. This year the IRS held up refunds until late Feb so it could crosscheck the numbers better.

Has anyone heard how well it worked? Some of my tax clients were very unhappy about it.

SimonJester
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Re: Does IRS have equivalent of credit freeze?

Post by SimonJester » Fri Oct 13, 2017 9:22 am

The best thing you can do if you do not qualify for the IRS IP PIN is adjust your withholding so you end up owing a little bit come tax time.

This was if a fraudster files a refund you are not stuck waiting on the IRS to sort things out while they owe you money. This can take anywhere from 6 months to years...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin

investingdad
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Re: Does IRS have equivalent of credit freeze?

Post by investingdad » Fri Oct 13, 2017 9:59 am

Pajamas wrote:
Thu Oct 12, 2017 9:16 pm
AQ wrote:
Thu Oct 12, 2017 9:13 pm
Curious how tax-filing fraud is ever possible? The impostor not only needs your identify info, but also W-2, dividend, capital gain/loss, mortgage payment, etc., etc?
Why would they need all that other information? They're not trying to file an accurate return, they're trying to file a return that maximizes the refund so they can pocket it.
Bingo.

We had a fraudulent return filed on our behalf for the 2015 tax year. Rather than owing money as we have every year, the jerkhole filed in bogus numbers in an attempt to collect a $7000 refund.

$7000!!

This idiot accessed my earnings history and should have realized that would never pass the IRS sniff test. Had it been a reasonable amount, perhaps. Instead the IRS flagged it and I found out later what was happening.

So while this pathetic piece of trash had the smarts to file a bad return, he wasn't smart enough, or diligent enough, to figure out what could work. Blinded by greed and stupidity.

And yes, we got a PIN for 2016 return.

fourwheelcycle
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Re: Does IRS have equivalent of credit freeze?

Post by fourwheelcycle » Fri Oct 13, 2017 12:16 pm

Theseus wrote:
Fri Oct 13, 2017 7:50 am
We are in the same boat. This is an interesting idea. When you say incomplete are you suggesting you file a return based on the information you have as of January 26? And then once all W2s,1099s, other information are in your hand you amend it?
I haven't thought about what I might put on an early return. I would not want to file with whatever info we have by January 26 because if I use our W2 forms, including our withholding amounts, w/o waiting until all our 1099 forms come in, I'm sure our return will show a refund. Once you file a return with a refund you are supposed to wait until you receive the refund from the IRS before you file an amended return. I would not want to get in that situation.

I am hoping there are some experienced tax people on this forum who will say yes, you could do that, and comment on what I might put in the return, or advise that I should not do it because filing a purposely incomplete return could get me in trouble with the IRS.

It does seem like filing an early return could preempt fraudulent returns, but what happens if my own early return sets off a fraud bell with the IRS because it is so different from my previous year returns.

neilpilot
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Re: Does IRS have equivalent of credit freeze?

Post by neilpilot » Fri Oct 13, 2017 3:56 pm

SimonJester wrote:
Fri Oct 13, 2017 9:22 am
The best thing you can do if you do not qualify for the IRS IP PIN is adjust your withholding so you end up owing a little bit come tax time
Actually that has always been the best thing you can do. No need to give the IRS an interest free loan, even at the current low rates.

MarkNYC
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Re: Does IRS have equivalent of credit freeze?

Post by MarkNYC » Fri Oct 13, 2017 4:14 pm

fourwheelcycle wrote:
Fri Oct 13, 2017 12:16 pm
Theseus wrote:
Fri Oct 13, 2017 7:50 am
We are in the same boat. This is an interesting idea. When you say incomplete are you suggesting you file a return based on the information you have as of January 26? And then once all W2s,1099s, other information are in your hand you amend it?
I haven't thought about what I might put on an early return. I would not want to file with whatever info we have by January 26 because if I use our W2 forms, including our withholding amounts, w/o waiting until all our 1099 forms come in, I'm sure our return will show a refund. Once you file a return with a refund you are supposed to wait until you receive the refund from the IRS before you file an amended return. I would not want to get in that situation.

I am hoping there are some experienced tax people on this forum who will say yes, you could do that, and comment on what I might put in the return, or advise that I should not do it because filing a purposely incomplete return could get me in trouble with the IRS.
I would advise against filing a tax return where you declare under penalty of perjury that you believe the tax return to be complete and accurate, and you know for a fact that it is incomplete and inaccurate.

sotpatro
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Re: Does IRS have equivalent of credit freeze?

Post by sotpatro » Fri Oct 13, 2017 4:54 pm

In light of these threats (i.e. tax-filing by a fraud to get refund), what would be your advise on whether or not to make estimated tax payment or having additional withholding from payroll because someone is expecting capital gains? Owning tax to IRS during tax time may mean penalty; however which choice is better?

thangngo
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Re: Does IRS have equivalent of credit freeze?

Post by thangngo » Fri Oct 13, 2017 5:29 pm

Other than headaches having to deal with the IRS, you will not lose your money. It might be 6-12 months later and the IRS will look-at your return very carefully but the IRS will pay you every pennies that are yours. Stop worrying about things that might have happened. Keep your eyes open, be cautious and deal with things when they actually come up. If you don't want to deal with those stuff, get a CPA who will do the legwork for you.

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