Fraud, ID Theft and Delayed Refunds

Jan 1, 2015

Expect Delays!
delays

Rather than receiving refunds, many of our clients have been receiving letters from the IRS requesting “verification of identity”. The most common letter is labeled “LTR 5447C”. Another variant is labeled “LTR 5071C”. The gist of the letter is that the IRS suspects that some unknown person has commandeered your name and social security number and has attempted to use this information for illicit gains. This is otherwise known as “identity theft”.

The abundance of caution on the part of the IRS is not unreasonable. The problem of identity theft combined with fictitious and fraudulent tax filings is well known. For instance, some enterprising prison inmates actually have invested a good deal of their rehabilitation time to research the tax system and innovate new ways to harvest bogus refunds. See full details here.

In any case, what this abundance of caution means to you is that obtaining your refund may require some extra work and patience. Without response, the IRS will simply not release your refund. You have two options to respond. I suggest that you try the first option for reasons soon to be clear.

  1. Call them. The phone number listed on the LTR 5447C is +1-267-941-1083. Call during business hours, east coast USA time (from 15:00 and later in Israel). Budget 1-2 hours for this task as the IRS is understaffed.
  2. Submit documents by mail. They request at least 2 documents which will typically include a copy of your social security card and USA passport. Other possible documents to submit include your birth certificate, citizenship document (if born overseas), driver’s license, ITIN letter (if relevant). Allow the IRS 90 days to respond to the written submission.
  3. After the 90 days passes without response from the IRS (and you should expect no response), then call IRS accounts at 267-941-1000 and ask the representative to confirm receipt of documents. Then ask him/her to place a “referral” to the person handling your case (which is most likely no one) and allow another 45 days for (non)response.
  4. After the 45 days passes without response, then contact the taxpayer’s advocate office for assistance. Call them at +1-787-522-8601, or fill out form 911 and fax to +1-855-818-5697. The advocate should call you in the next 14 days. If not, then re-fax form 911.
  5. With the intervention of the advocate, the IRS should then release your refunds in the next 90 days.

Because you will most likely need to call the IRS anyway, I suggest that you start by calling them as detailed in option 1.

 

UPDATE 20-Dec-15

If your earned income is sourced from Israel or any country outside of the USA, then you will also need to submit verification of your earned income. The IRS letter does not mention this, but in addition to verifying your identity they also want to verify your earned income.

For taxpayer’s living in Israel, submit your Israel forms 106 in Hebrew and also translated to English. For other non-English documents, have a local translator provide the English translation or contact our office. For English speaking countries, simply submit copies of your pay slips or annual earned income summary.

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Many taxpayers receive identity verification notices from the IRS, and in most cases, the process is straightforward and can be resolved without much difficulty.

You have the following options to verify your identity:

Option 1: Verify through the IRS using your ID.Me account

 

Option 2: Use the IRS Document Upload Tool

    • Please note when they ask for the access code answer "no" and put in the notice/letter type 5447C

    • Alternatively, we can upload the documents on your behalf. (Please note additional fees apply.)

For both options 1 and 2:

    1. Allow at least 30 days to process.
    2. You can then check your status on IRS Where's My Refund or request that we pull your transcript.

    Option 3: Call the IRS

      1. Phone number: 1-267-941-1083

      1. When calling the IRS please note that there could be long wait times. We recommend the best time to call is as close to 1PM Israel time as possible, when the lines first open.

    When speaking with the IRS agent:

      • Let them know you are calling in response to a Letter 5447C letter for tax year 202x.

      • Provide the control number as it appears on the first page of the letter.

      • Be prepared to answer any question they ask from the first 2 pages on both tax returns, including:

          • complete address

          • filing status (Head of Household /Married Filing Separately / Married Filing Joint/ Single)

          • refund amount.

      • If you are unsure of an answer you may ask the agent where it can be found on the return.

      • Know the dates of birth for you and the children on the return

      • Know your mother's maiden name

      • If they ask about W-2 income, tell them since you live outside of the US your income isn’t reported on a W-2, but rather the equivalent form 106 instead.

    They hopefully will not ask any more financial questions.

    If your identity is successfully verified during the call, the IRS will typically inform you immediately. Your refund should then be released within approximately 6-9 weeks.

    Documents Required in All Cases

    Regardless of the verification method you choose, you will need:

      • a copy of the 5447C letter you received

      • the first 2 actual 1040 pages of your 202x and 202x tax returns

    Additional Documents for ID.me or Document Upload Verification

    If you are verifying online through ID.me or using the IRS Document Upload Tool, you will also need:

    Two clear copies of acceptable identification, as listed in the IRS letter (for example passport and license).