8.6.5  Identity Theft Procedures

Manual Transmittal

October 19, 2012

Purpose

(1) This transmits revised IRM 8.6.5, Conference and Settlement Practices, Identity Theft Procedures.

Material Changes

(1) The ID theft IRM for Appeals was expanded, reorganized and updated. Content was revised to comply with IRM writing style and format provisions. The significant changes are listed in the table below:

Current IRM Description of Change Previously IRM
IRM 8.6.5.1, Overview Introduced IRM 8.6.5 sections New content
IRM 8.6.5.1.1, Appeals Policy Describes Appeals ID theft policies. New content
IRM 8.6.5.1.2, Definition of Key Terms
  • Reorganized and added table for clarity

  • Expanded examples and added new content

  • Defines preparer fraud and differentiates between preparer fraud and ID theft

  • Defines the difference between Good Taxpayer and Bad Taxpayer

IRM 8.6.5.1
IRM 8.6.5.1.3, Resources Removed link to IRM 10.5.4, Privacy, Information Protection and Data Security, Incident Management Program as it is not useful for Appeals IRM 8.6.5.1
IRM 8.6.5.2, ID Theft Tracking Indicators Shows when the ID theft Tracking Indicator is input or updated:
  • ID theft is initially alleged or suspected.

  • ID theft supporting documents are either received, not necessary or not provided.

  • ID theft determination is made.

New content
IRM 8.6.5.2.1, Inputting or Updating ID Theft Tracking Indicators Explains how to input or update an ID theft tracking indicator through APS. New content
IRM 8.6.5.2.2, APS Instructions for Inputting ID Theft Tracking Indicators No significant changes IRM 8.6.5.1.5
IRM 8.6.5.2.3, Reversing ID Theft Indicator TC 971 AC 501 No significant changes IRM 8.6.5.1.6
IRM 8.6.5.2.4, APS Instructions for Reversing Identity Theft Tracking Indicator TC 971 AC 501 No significant changes IRM 8.6.5.1.7
IRM 8.6.5.3, ID Theft Referral to Appeals No significant changes IRM 8.6.5.1.1
IRM 8.6.5.3.1, Form 14027-B, ID Theft Case Referral No significant changes IRM 8.6.5.1.1
IRM 8.6.5.3.2, Form 14103, ID Theft Assistance Request Guidance on processing ID theft referral Form 14103. New content
IRM 8.6.5.4, Substantiation Documentation
  • Look for TC 971 AC 501, TC 971 AC 506, or TC 971 AC 522 before requesting substantiation documentation

  • Form 14039 is also available in Spanish as Form 14039 SP.

  • Added 30 day deadline to provide substantiation documentation.

IRM 8.6.5.1.2
IRM 8.6.5.5, ID Theft Research Describes what records are used to make an ID theft determination.
  • Internal records useful in making a determination.

  • Appeals does not follow investigative guidance outside of IRM 8.6.5 that my compromise its core mission.

New content
IRM 8.6.5.6, Adjusting ID Theft liabilities Added an overview and guidance for adjusting ID theft liabilities.
  • The taxpayer's address in IDRS must be verified and updated if it is incorrect.

  • Problems with adjustment requests are resolved between APS and the initiator.

New content
IRM 8.6.5.6.1, Income Related Adjustment Step table for adjusting income-related ID theft tax liabilities. New content
IRM 8.6.5.6.2, Return Related Adjustment-Taxpayer Didn't File Step table for adjusting return related ID theft-taxpayer didn't file. New content
IRM 8.6.5.6.3, Return Related Adjustment-Multiple Returns Filed Step table for adjusting return related ID theft-multiple returns filed. New content
IRM 8.6.5.6.4, Interim Adjustment Step table for interim adjustments. New content
Exhibit 8.6.5-1, ID Theft Indicator Acronyms and Definitions Updated to incorporate expanded list of acronyms Exhibit 8.6.5-1

Effect on Other Documents

IRM 8.6.5, dated August 7, 2012, is superseded.

Audience

Appeals employees

Effective Date

(10-19-2012)

Susan L. Latham
Director, Policy, Quality and Case Support

8.6.5.1  (10-19-2012)
ID Theft Overview

  1. IRM 8.6.5, Identity Theft Procedures, provides information and instruction to Appeals employees working Identity (ID) theft claims. This IRM is organized in six sections:

    • ID Theft Overview: Discusses Appeals policy, definitions of ID theft and preparer fraud, and resources available for considering ID theft claims.

    • ID Theft Tracking Indicators: Covers inputting and updating the ID theft tracking indicator during the life of an ID theft claim.

    • ID Theft Referral to Appeals: Discusses the ID theft referral process to Appeals including forms 14027-B and 14103.

    • Substantiation Documentation: Discusses when substantiation documentation is required.

    • ID Theft Research: Outlines how Appeals determines whether a taxpayer suffered a tax liability attributable to ID theft.

    • Adjusting ID Theft Liabilities: Step tables for adjusting ID theft liabilities.

8.6.5.1.1  (10-19-2012)
Appeals Policy

  1. ID theft arises as an issue in Appeals when:

    • The Identity Theft Protection Specialized Unit (IPSU) refers a taxpayer's ID theft affidavit to associate with an open Appeals case, or

    • The taxpayer raises the issue in a docketed or non-docketed case to the hearing officer.

  2. Appeals is not bound by investigative requirements outside of IRM 8.6.5 that might compromise its core mission of impartially resolving tax disputes. For example:

    • Appeals does not access the Accounts Management System due to ex parte risk. See IRM 8.1.10.1 Ex Parte Communications.

    • The identity of the bad taxpayer is generally unknown to Appeals and Appeals does not investigate, look for or reach out to the bad taxpayer.

  3. If an ID theft claim received from Exam or Collection is not fully developed, the hearing officer will follow IRM 8.2.1.4 procedures and determine whether to:

    • Return the case to the originating function for further development or

    • Retain it in Appeals and consider the claim on the basis of the information in the file.

      Note:

      CDP cases cannot be returned due to statutory requirements. See the applicable Appeals IRM for your work stream to determine if an undeveloped ID theft claim can be returned to the originator for further development.

  4. Identity theft cases are prioritized and worked expeditiously.

8.6.5.1.2  (10-19-2012)
Definition of Key Terms

  1. IDENTITY THEFT: Identity (ID) theft occurs when someone uses an individual’s personal information, such as name, Social Security Number (SSN), or other identifying information to commit fraud or other crimes. Taxpayers may notify the IRS when they believe they may have experienced an identity theft incident. In these instances, taxpayers must provide documentation to establish that they are identity theft victims.

  2. ID theft affects tax administration in two primary ways:

    Income-related
    • ID thief uses the victim’s SSN to obtain employment.

    • Results in what appears to be unreported income under the victim’s SSN.

    • Often doesn't come to the taxpayer's attention until they receive IRS correspondence regarding unreported income.

    Return-related
    • ID thief uses the victim’s SSN to file a false federal income tax return to generate a fraudulent refund.

    • ID thief generally files early via e-file.

    • Often doesn't come to the taxpayer's attention until they try to file their return and it's rejected as a duplicate.

    • Unaware of the fraud, the IRS may propose and assess a liability against the innocent taxpayer as a result of reversing the fraudulent credits and withholding claimed on the return.

  3. PREPARER FRAUD: Return preparer fraud involves the preparation and filing of false income tax returns by unscrupulous preparers who may claim:

    • Inflated personal or business expenses;

    • False deductions;

    • Unallowable credits;

    • Excessive exemptions; or

    • Fraudulent tax credits such as the Earned Income Tax Credit (EITC).

  4. The preparer's clients may or may not have knowledge of the false expenses, deductions, exemptions and/or credits shown on their tax returns.

  5. Below are two examples to help distinguish ID theft from Preparer Fraud:

    1. Preparer fraud: A taxpayer used a preparer in 2009 to complete and file Form 1040. The preparer changed the return without the taxpayer's knowledge by increasing the withholding tax claimed and diverted the resulting refund into the preparer’s personal account.

    2. ID Theft: In 2010, the taxpayer filed his own return and did not use the preparer. Without the taxpayer's knowledge, the preparer used the victim’s SSN.

  6. ID theft tracking indicators are not placed on preparer fraud cases.

  7. GOOD TAXPAYER-BAD TAXPAYER: Adjustment processing terms for distinguishing between the good taxpayer who is the victim of ID theft and the bad taxpayer who used the taxpayer's SSN to file a fraudulent return. When requesting ID theft tax adjustments, identify on the adjustment documents which transactions and credits belong to the good taxpayer and which belong to the bad taxpayer.

  8. NULLITY: Adjustment process where the bad taxpayer's fraudulent return filed under the good taxpayer's SSN is treated as if it were never filed.

  9. HEARING OFFICER: The Appeals Officer or Settlement Officer conducting the Appeals hearing.

  10. APPEALS ID THEFT SPECIALIZED UNIT: The APS unit responsible for inputting Appeals ID theft tax adjustments. Due to the complexity of these adjustments, this function was centralized. The address for the specialized unit is found on a document titled "Routing ID theft Tax Adjustments" on the Appeals ID theft webpage http://appeals.web.irs.gov/tech_services/id-theft/default.htm.

8.6.5.1.3  (10-19-2012)
Resources

  1. Resources for working ID theft claims in Appeals can be found at:

    • The Appeals ID theft webpage has links and resources including contact information for the Appeals ID theft liaisonhttp://appeals.web.irs.gov/tech_services/id-theft/default.htm

    • The IRWeb ID theft site, which includes forms, publications and resources http://irweb.irs.gov/AboutIRS/bu/pipds/pip/itim/idtheft/default.aspx

    • IRM 10.5.3, Identity Theft Protection Program

  2. Additionally, Appeals has an ID theft liaison who is the:

    • Subject matter expert for ID theft questions, problems or issues in Appeals.

    • Point of contact for the rest of the IRS on ID theft issues in Appeals.

    • Point of contact for IPSU to submit and follow up on ID theft referrals to Appeals.

8.6.5.2  (10-19-2012)
ID Theft Tracking Indicators

  1. When ID theft is initially alleged or suspected, the hearing officer must:

    1. Add Feature Code “ID” to the Appeals Centralized Database System case control

    2. Mark the taxpayer's account in Integrated Data Retrieval System (IDRS) using an ID theft tracking indicator as described in the step tables below.

  2. ID theft tracking indicators are:

    • Input as a Transaction Code (TC) with an Action Code (AC) in IDRS.

    • Displayed in IDRS via command codes ENMOD or IMFOLE.

    • Used to track ID theft inventory from the initial ID theft allegation to account resolution.

  3. There are three points in the life of an ID theft claim in Appeals when the hearing officer must input or update the ID theft tracking indicator:

    • ID theft is initially alleged or suspected.

    • ID theft supporting documents are provided, not necessary or not provided.

    • ID theft determination is made.

  4. ID theft is initially alleged or suspected: Servicewide guidance for inputting the ID theft indicator is shown below:

    If... Review... And input...
    ID theft is alleged or suspected. IRM 10.5.3.2.6.1 TC 971 AC 522 with Tax Administration Source Code:
    • PNDCLM


    Prior to inputting this indicator, research ENMOD/IMFOLE to see if it has already been input for the same tax year/incident. If it has, do not request a duplicate indicator.

  5. ID theft supporting documents are provided, not necessary or not provided: Servicewide guidance for updating the ID theft indicator is shown below:

    If... Review... And input...
    ID theft supporting documents are provided by the taxpayer. IRM 10.5.3.2.7.3 TC 971 AC 522 with one of the following Tax Administration Source Codes:
    • INCOME - used when income has been reported under the taxpayer's SSN without their consent or knowledge.

    • MULTFL -used when two or more returns are filed for the same tax period under the same SSN.

    • INCMUL - used when both INCOME and MULTFL apply.

    • NOFR - used when the victim is not required to file a return.

    • OTHER - used when the situation does not fit any Tax Administration Source Code Type.

    ID theft documents are not necessary.
    • IRM 10.5.3.2.7.4

    • IRM 8.6.5.4

    TC 971 AC 522 with Tax Administration Source Code:
    • NODCRQ

    ID theft documents are required but not provided within the deadline given. IRM 10.5.3.2.7(2) TC 972 AC 522 with Tax Administration Source Code:
    • NORPLY

  6. ID theft determination is made: Servicewide guidance for updating the ID theft indicator to close the claim is shown below:

    If... Review... And input...
    ID theft did not occur. IRM 10.5.3.2.8 TC 972 AC 522 NOIDT to reverse the pending ID theft claim.
    ID Theft affecting tax administration is confirmed and all corrective actions taken.
    • IRM 10.5.3.2.10

    • IRM 8.6.5.2.1

    TC 971 AC 501 to close the ID theft claim with one of the following Tax Administration Source Codes:
    • INCOME: ID theft substantiated-underreported income.

    • MULTFL: ID theft substantiated-two or more tax returns filed for one taxpayer.

    • INCMUL: ID theft substantiated-both underreporting of income and multiple filings.

    • NOFR: ID theft substantiated-victim doesn't have a filing requirement.

    • OTHER: ID theft substantiated-cannot be identified as income or multiple filing related.

    • RFND: ID theft identified by the filing of a false return in order to obtain a refund.

8.6.5.2.1  (10-19-2012)
Inputting or Updating ID Theft Tracking Indicators

  1. ID theft tracking indicators are input and updated via Form 4844, Request for Terminal Action or Form 3177, Notice of Action for Entry on Master File. Prepare and submit the form to Account and Processing Support (APS) with the following information:

    • Taxpayer's SSN and name control.

    • Tax year affected by the ID theft incident, using format MMDDYYYY.

    • The appropriate TC and AC code as shown in the "And input " column in IRM 8.6.5.2 table above.

    Note the following in the Miscellaneous field:

    • BOD/Function code: AP.

    • Program Name: AP.

    • Tax Administration Source Code: See the "And input" column in IRM 8.6.5.2 table above.

  2. A request to input a TC 971 AC 501 is submitted to APS to be input after the ID theft tax adjustment is complete. The input of this tracking indicator closes the ID theft claim.

  3. Prior to requesting the TC 971 AC 501, verify and update the taxpayer’s address as an incorrect address may result in subsequent ID theft issues.

  4. If a taxpayer is disputing a proposed assessment related to ID theft and the appeals officer agrees to a "no change" because the proposed liability was the result of ID theft, request a TC 971 AC 501 through local APS to protect the taxpayer and close the ID theft claim.

8.6.5.2.2  (10-19-2012)
APS Instructions for Inputting ID Theft Tracking Indicators

  1. APS will generally input ID theft tracking indicator requests within 5 business days of receipt.

  2. Navigate to FRM77

    • Enter ENMOD (SSN), then press ENTER;

    • Enter REQ77.

    • FRM77 is displayed for the selected SSN.

  3. Complete the following fields on the FRM77 screen.

    FIELD ENTER
    TC Transaction code requested on Form 4844 or Form 3177
    TC 971/151-CD Action Code requested on Form 4844 or Form 3177
    TRANS-DT Auto populated with the current date
    SECONDARY-DT The tax year affected by the ID theft incident in the format MM-DD-YYYY
    MISC The specific information from Form 4844 or 3177 will showing:
    • BOD/Function: AP

    • Program Name: AP

    • Tax Administration Source: as requested on Form 4844 or Form 3177

    REMARKS IDENTITY THEFT

8.6.5.2.3  (10-19-2012)
Reversing the ID Theft Tracking Indicator TC 971 AC 501

  1. In some instances, it may be necessary to manually reverse TC 971 AC 501. Reversal may be necessary because:

    1. The taxpayer requests reversal.

    2. There was a keying or internal error in the input of the TC 971 AC 501.

    3. The original ID theft claim was fraudulent.

    4. The TC 971 AC 501 has an internally identified negative affect on the taxpayer.

    5. Other situations not listed above.

  2. If one of the above conditions exists, update the account by completing Form 4844 or Form 3177 and requesting input of a TC 972 AC 501. Submit via secure email to APS. The form must contain the following information:

    • Taxpayer’s SSN and name control

    • Tax year affected by the ID theft incident in MMDDYYYY format

    • BOD/Function code: AP

    • Program Name: AP

    • Reason Code: Reason for reversing from the table below.

      REASON CODE ABBREVIATION REASON FOR REVERSAL
      TPRQ Taxpayer requests reversal of the TC 971. Taxpayer may feel issue is resolved or is no longer needed, and is negatively impacting them.
      IRSERR TC 971 is due to a typographical mistake or another internal mistake.
      IRSADM TC 971 is causing a negative impact on another internal process or system.
      FALSE Original ID theft incident claim is determined to be fraudulent.
      OTHER Reason for the reversing TC 971 does not meet any of the reasons above.

8.6.5.2.4  (10-19-2012)
APS Instructions for Reversing ID Theft Tracking Indicator TC 971 AC 501

  1. APS receives a Form 4844 or Form 3177 requesting reversal of the ID theft indicator via a TC 972 AC 501.

  2. Navigate to FRM77 via IDRS.

    • Enter ENMOD (SSN), then press Enter

    • Enter REQ77

    • FRM77 is displayed for the selected SSN

  3. Complete the following fields on the FRM77 screen.

    FIELD ENTER
    TC 972
    TC 972/151-CD 501
    TRANS-DT Enter the transaction date of the TC 971 AC 501 being reversed
    SECONDARY-DT Enter the tax year of the TC 971 AC 501 being reversed in the MM-DD-YYYY format
    MISC Form 4844 or Form 3177 will show a Reason Code from the table above that reflects the reason for the reversal
    REMARKS Enter your remarks

8.6.5.3  (10-19-2012)
ID Theft Referral to Appeals

  1. The IPSU in Wage & Investment, Accounts Management, was established to assist taxpayers who are or may become victims of ID theft. Part of IPSU's responsibilities include referring ID theft claims to functions who have an open control on a taxpayer's case. The subsections that follow describe the forms and processes with which referrals are made and Appeals response to referrals.

8.6.5.3.1  (10-19-2012)
Form 14027-B, ID Theft Case Referral

  1. When a taxpayer claims ID theft, IPSU looks to see if the taxpayer has an open control in any other business unit. If IPSU discovers the taxpayer has a case in Appeals, a referral is made on Form 14027-B, Identity Theft Case Referral, to the Appeals ID theft liaison. Referrals are made through the Appeals ID theft liaison due to ex parte concerns. IPSU does not disrupt the normal processing of the Appeals case or take adjustment actions on referrals.

  2. The Appeals ID theft liaison faxes the referral and affidavit to the Appeals employee handling the taxpayer's case.

  3. Every 30 days, IPSU follows up with the Appeals liaison on the status of the referral. In response, the Appeals ID theft liaison follows up with the Appeals employee to verify the status of the claim.

  4. At the conclusion of the case, the Appeals hearing officer closes an ID theft referral by:

    1. Completing part VII of Form 14027-B to reflect the results of the referral and faxing it back to the originating IPSU employee.

    2. Emailing the Appeals ID theft liaison to let them know the referral is closed.

8.6.5.3.2  (10-19-2012)
Form 14103, ID Theft Assistance Request

  1. If a taxpayer submits an inquiry regarding a ID theft tax related issue and IPSU discovers the taxpayer has a case in Appeals AND the taxpayer's situation meets TAS criteria 5 - 7, a referral is made on Form 14103 Identity Theft Assistance Request. Referrals are made through the Appeals ID theft liaison due to ex parte concerns.

  2. The Appeals ID theft liaison faxes the referral and affidavit to the Appeals employee handling the taxpayer's case. The liaison acknowledges receipt of the Form 14103 within 5 business days via secure email or fax number provided by the IPSU employee on the Form 14103, Section II, Box 3.

  3. Every 30 days, IPSU follows up with the Appeals liaison on the status of the referral. In response, the Appeals ID theft liaison follows up with the Appeals employee to verify the status of the claim.

  4. Review Section IV, Specific Assistance Requested, and determine whether the recommended action is appropriate and the requested completion date is reasonable. These cases are treated as a priority similar to the TAS OAR.

  5. At the conclusion of the case, the Appeals hearing officer closes an ID theft referral by:

    1. Completing Section V and VI of Form 14103 to reflect the results of the referral and faxing it back to the originating IPSU employee.

    2. Alerting the Appeals ID theft liaison by email that the referral is closed.

8.6.5.4  (10-19-2012)
Substantiation Documentation

  1. Taxpayers alleging ID theft are generally required to provide substantiation documentation to establish that they are ID theft victims unless there is an unreversed TC 971 AC 501, AC 506, or AC 522 Source Code INCOME, MULTFL, INCMUL, NOFR or OTHER on the account in the prior 3 years. Before requesting substantiation documentation, check ENMOD for:

    • TC 971 AC 501 Taxpayer-Identified Identity Theft Affecting Tax Administration, to see if the taxpayer suffered a substantiated ID theft incident in the prior 3 years.

    • TC 971 AC 506 IRS-Identified Identity Theft Affecting Tax Administration, to see if the taxpayer suffered an ID theft incident in the prior 3 years. See also IRM 10.5.3.2.12

    • TC 971 AC 522 Substantiation Documentation Received by IRS, to see if any other unit substantiated the ID theft incident. The AC 522 with certain Tax Administration Source Codes indicates that a business unit received and substantiated the ID theft. See also IRM 10.5.3.2.7.3.

    Caution:

    This excludes accounts marked with a TC 971 AC 522 reflecting "PPDS" as the BOD, "OPIP" as the Program, and "OTHER" as the Tax Administration Code.

  2. Substantiation documentation is valid for 3 years from the date received by the IRS. If the taxpayer experiences a new ID theft incident after the 3 year time frame, the taxpayer will need to submit new documents.

  3. If there's no record of a prior substantiated ID theft incident, request that the taxpayer provide the following substantiation documentation within 30 days:

    1. Authentication of Identity: a copy of a valid U.S. federal or state government issued form of identification (examples include a driver’s license, state identification card, social security card, or passport).

      Note:

      IRS no longer accepts Puerto Rican birth certificates issued before July 1, 2010. Taxpayers with birth certificates issued before this date must get new documentation from the Puerto Rico Vital Statistics Record Office.

    2. Evidence of ID theft: Form 14039, IRS Identity Theft Affidavit, or a copy of a police report indicating ID theft as the issue.

      Note:

      The IRS affidavit is also available in Spanish, Form 14039(SP).

  4. If a taxpayer is required to provide substantiation documentation but fails to do so within a 30 day deadline given, proceed with case resolution assuming the taxpayer is not an ID theft victim.

8.6.5.5  (10-19-2012)
ID Theft Research

  1. Internal records and the facts of the case are often sufficient to make an ID theft determination. Internal records that might be useful in making an ID theft determination include:

    • IRPTR: Displays payee/payor information.

    • ENMOD: Displays name, address, and other entity information including ID theft tracking indicators.

    • IMFOL: Displays a summary of taxpayer's filing history.

    • RTVUE/TRDBV: Displays tax return information.

    • NAMES: To research the National Name Search Facility for a taxpayer's SSN.

    • INOLE: Display account information.

    • DUPOL: Display duplicate SSN data for research purposes.

    • REINF: To request individual refund information

    • MFTRA-U: Displays who the SSN is assigned to, whether other names are listed for the SSN.

    • DDBKD: Displays information regarding the use of the taxpayer's SSN.

      Note:

      Additional information on these and other command codes can be found at the IDRS Command Codes Job Aid found here.


  2. Use good judgement before requesting documents from the taxpayer.

    Example Additional documentation needed?
    Taxpayer disputes an unreported 1099-C from a credit card company for debt forgiveness. This may require additional documentation. If the credit card company acknowledges their error, they can issue a corrected 1099-C.
    Taxpayer is a physician in New York who disputes unreported W-2 janitorial income from California. The disputed liability may be conceded without additional documentation, given the taxpayer's location and full-time employment in a different line of work.
    Taxpayer is a self-employed painter in Minnesota who disputes unreported 1099 income from a painting contractor in Iowa. This may require additional documentation, given the taxpayer's location and line of work.

8.6.5.6  (10-19-2012)
Adjusting ID Theft liabilities

  1. The hearing officer must ensure the taxpayer's address in IDRS is correct. Failure to verify and update IDRS to the taxpayer's correct address may result in the ID thief getting the taxpayer's mail from the IRS, including the Identity Protection Personal Identification Number needed to file in future years.

  2. The use of tax computations by an appeals officer or tax computation specialist is dependent on the complexity of the adjustment. Tax computations are generally not necessary when Form 3870 is sufficient to adjust a taxpayer's account.

  3. Unless the hearing officer specifies otherwise, APS:

    • Utilizes the IDT1 process.

    • Utilizes the Campus BSC address for the IRSN since Appeals does not have a name, SSN or address for the bad taxpayer.

    • Assumes Appeals verified the good taxpayer via their request for an Appeals hearing, Form 14039 and the proof of ID provided.

    • Assumes Appeals verified the taxpayer's correct address in IDRS on receipt of the case and at closing.

  4. APS must rectify problems with adjustment requests with the initiator. If the initiator is not responsive or the issue remains unresolved, raise the issue to the PTM / ATM level.

  5. When utilizing Form 12810 Account Transfer Request Checklist, APS must add "IDT Case, please expedite" to the top of the form.

8.6.5.6.1  (10-19-2012)
Income Related Adjustment

  1. When it is confirmed that an ID thief used the taxpayer's SSN to earn income, the hearing officer must instruct APS to adjust the liability to make the taxpayer whole:

    Step Process
    1 Prepare Form 3870 and write "ID theft adjustment" at the top. Identify the bad transaction(s) that must come off of the account.

    Example:

    "Reverse the TC 290/300 assessed including interest and penalties. "

    2 Prepare Form 4844 for APS to input TC 971 AC 501 after the account is adjusted. See IRM 8.6.5.2.1
    3 Close the case to your ATM.
    4 The ATM will ACAP the case and request the servicing APS unit transfer the file (including Form 3870 and 4844) on PEAS to the Appeals ID theft Specialized Unit. The address of the specialized unit is found on a document titled "Routing ID theft Tax Adjustments" on the Appeals ID theft website linked here.

8.6.5.6.2  (10-19-2012)
Return Related Adjustment-Taxpayer Didn't File

  1. When it is confirmed that an ID thief used the taxpayer's SSN to file a fraudulent return AND the taxpayer had no filing requirement, the hearing officer must instruct APS to adjust the liability to make the taxpayer whole:

    Step Process
    1 Prepare Form 3870 and write "ID theft adjustment-treat this fraudulent return as a nullity" at the top. Identify the bad transaction(s) that must come off of the account. Address any refunds, prepayment credits or payments on the account.

    Example:

    The bad taxpayer got a fraudulent refund or the fraudulent refund is frozen on the account or was offset to another year that the good taxpayer owes for. In all those instances, direct APS to reverse the fraudulent refund.

    Example:

    The good taxpayer had refunds or payments applied to the liability. Those credits must be returned. Direct APS whether and where to move the good taxpayer's credits

    2 Prepare Form 4844 for APS to input TC 971 AC 501 after the account is fully adjusted. See IRM 8.6.5.2.1.
    3 The ATM will ACAP the case and request the servicing APS unit transfer the file (including Form 3870 and 4844) on PEAS to the Appeals ID theft Specialized Unit. The address of the specialized unit is found on a document titled "Routing ID theft Tax Adjustments" on the Appeals ID theft website linked here.

8.6.5.6.3  (10-19-2012)
Return Related Adjustment-Multiple Returns Filed

  1. When it is confirmed that an ID thief used the taxpayer's SSN to file a fraudulent return and the taxpayer also filed, the hearing officer must instruct APS to adjust the liability to make the taxpayer whole:

    Step Process
    1 Prepare Form 3870 and write "ID theft adjustment-treat this fraudulent return as a nullity" at the top. Identify the bad transaction(s) that must come off of the account. Address any refunds, prepayment credits or payments on the account.

    Example:

    The bad taxpayer got a fraudulent refund or the fraudulent refund is frozen on the account or was offset to another year that the good taxpayer owes for. In all those instances, direct APS to reverse the fraudulent refund.

    Example:

    The good taxpayer had refunds or payments applied to the liability. Those credits must be returned. Direct APS whether and where to move the good taxpayer's credits

    2 Prepare Form 4844 for APS to input TC 971 AC 501 after the account is fully abated/adjusted. See IRM 8.6.5.2.1
    3 Attach a copy of the good taxpayer's "duplicate" TC 976 return (electronic or paper) or the taxpayer's original return if not posted as a "duplicate" TC 976 return. A copy of the return can be secured via ESTAB, CIS image, TRDBV, or TRPRT.
    4 The ATM will ACAP the case and request the servicing APS unit transfer the file (including Form 3870 and 4844) on PEAS to the centralized APS location for making ID theft tax adjustments. That location is listed on the document "Routing ID theft Tax Adjustments" on the ID theft web page linked here.

8.6.5.6.4  (10-19-2012)
Interim Adjustment

  1. Docketed cases generally require adjustments to be input as an interim adjustment and not at closing. See the table below for making an interim adjustment on income or return related ID theft tax liabilities:

    Step Process
    1 Prepare the following documents In APGolf and save them to your desktop:
    • Form 3870: Look at the Table above for your case type and see step 1.

    • Form 4844: See Step 2 in the applicable Table above.

    • ACDS Update Request form: Change the caption from ACDS Update Request to Interim Adjustment Request-ID Theft.

    2 Attach the documents to a secure email with a subject line Interim Adjustment-ID Theft and forward it to your ATM for approval.
    3 The ATM will note the interim adjustment is approved and forward the secure email with attachments to *AP-TS-APS-Campus-BSC ACDS Update Request
    4 APS will inform the requesting employee when the interim adjustment has been processed.

    Note:

    If APS alerts the hearing officer that an adjustment cannot be made due to a -L freeze, the hearing officer will advise APS to reverse the TC 420 and then request it be reinput after the adjustment posts.

Exhibit 8.6.5-1 
ID Theft Indicator Acronyms and Definitions

The following tables describe the terms and acronyms used for the TC 971 AC 501, 504, and 506 identity theft indicator codes. The three tables are: 1) BOD/Function, 2) Program Name, and 3) Tax Administration Source. Not all Tax Administration Source Codes are available to all BOD/Functions.

  1. BOD/Function

    Term/Acronym Description
    AP Appeals
    CI Criminal Investigation
    LBI Large Business & International
    MITS Modernization & Information Technology Services
    OS Operations Support
    PPDS Privacy, Governmental Liaison & Disclosure
    SBSE Small Business / Self-Employed
    TAS Taxpayer Advocate Service
    WI Wage & Investment

  2. Program Name

    Term/Acronym Description
    ACS Automated Collection System
    AM Accounts Management (IRS-identified identity theft)
    AMADJ Accounts Management (TP-identified identity theft)
    AMTAP Accounts Management Taxpayer Assurance Program
    AP Appeals
    ASFR Automated Substitute for Return
    AUR Automated Underreporter
    CA TAS Case Advocate
    CFBALDUE SB/SE: Field Collection - Taxpayer Delinquency Accounts
    CFDELRET SB/SE: Field Collection - Taxpayer Delinquency Investigations
    CONGINQ Congressional Inquiry
    CORR SB/SE Correspondence Exam
    CSCO Compliance Services Collection Operations
    CSIRC Computer Security Incident Response Center
    EXAM W&I Correspondence Exam
    FA Field Assistance
    FLDEXAM Field Exam
    LBI Large Business & International
    OPIP Office of Privacy & Information Protection
    PHSH Phishing
    PREREF Pre-Refund Program
    RC Refund Crime
    RFND Refund Crime
    RICS Return Integrity & Correspondence Services
    SP Submission Processing
    TDI Tax Delinquency Investigation
    WHC Withholding Compliance

  3. Tax Administration Source

    Term/Acronym Description
    DECD Taxpayer is deceased.
    INCOME Identity theft identified and substantiated due to an underreporting of income
    MULTFL Identity theft identified and substantiated due to two or more tax returns filed for one taxpayer
    INCMUL Identity theft identified and substantiated due to both underreporting of income and multiple filings
    NOFR Substantiated identity theft incidents where the victim does not have a filing requirement
    OTHER Identity theft which cannot be identified as related to any existing Tax Administration Source types
    RFND Identity theft identified by the filing of a false return in order to obtain a refund
    PRISNR Taxpayer is incarcerated.


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