The IRS is holding up a record number of refunds due to identity theft concerns. Theoretically, they are supposed to send you a letter and explain what happened and what you need to do. However, we’re finding that the letter either never seems to come or it’s very delayed.
If you’ve been waiting a longer than normal time for your refund, check on the status at the IRS website. If you see something that indicates it may be delayed, then you must take action. Most likely, the issue is identity theft, or a concern about it.
One of my clients had their credit card identity stolen in the Home Depot hack several years ago. That first year, someone used that credit card to get additional information and they applied for a refund of my client’s withheld and estimated taxes early in the tax year. When it came time to file my clients’ tax return, the IRS stopped the refund. Someone else had already taken the money.
In this case, the IRS made my clients go through a very involved procedure to prove who they were and every year since, they end up having to call if there is a refund. It seems like there is a permanent hold on issuing refunds because they had a serious data breach.
In other cases, there is widespread fraud and so you may have a hold by the IRS even if you didn’t have any identity theft. It’s just that your return shows something that commonly is a problem such as refundable tax credits like the Earned Income Tax Credit.
If you do have to prove your identity, the IRS is going to ask you some general questions regarding your past few years of filed tax returns. They may ask the amount of your adjusted gross income or the source of that income. You’ll need to have your tax returns handy when you call them. Usually you need the past two years plus any copies of W-2s and 1099s that you used for the tax return. You may also have to remember past loans you had or places you’ve lived.
I went through this procedure for my elderly mother, who suffers from dementia and so I am the POA (power of attorney) for her. They warned me that if I missed one of the questions, it would be necessary to take her in person to an office. I’m not sure what good that would do since she wouldn’t be able to answer the questions and it would be a major hassle transporting her since she is an invalid. Luckily, I knew the answers to the questions which included the name of the mortgage company she had on her last house (none) and where she had lived 15 years before. I also had copies of the previous two tax returns because I had prepared them for her.
If you do receive a notice, it’s going to be one of 4 letters. What you do next will depend on which letter you get:
Letter 5747C: You will need to go to the IRS office in person. Make an appointment first and bring the documents that they are requesting in the letter.
Letter 4883C: You must call to resolve the issue. Make sure you have a copy of the letter, a prior year tax return, the return for the year in question and all supporting documentation for those returns.
Letter 5447C: You can call or write to resolve the issue. If you call, make sure you have the letter, prior year return, your most recent return and the supporting documents. If you write, include copies of all the requested information.
Letter 5071C: You can either go online or call to resolve the issue. If you call, again, you need the letter, last year’s return, this year’s return and supporting documentation.