8.6.5  Identity Theft Procedures

Manual Transmittal

January 06, 2015

Purpose

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

Material Changes

(1) Significant updates were made to IRM 10.5.3, Privacy and Information Protection, Identity Protection Program. This IRM update incorporates relevant portions of the IRM 10.5.3 updates.

(2) Instructions were added throughout for Business Master File (BMF) cases.

(3) Instructions were reorganized for better readability and to better reflect the flow of a case with an ID theft issue through the Appeals process.

(4) Sections were added with case closing instructions for Appeals technical employees.

(5) Deleted Appeals Account and Processing Support instructions, which are now located in IRM 8.20.

Effect on Other Documents

IRM 8.6.5, dated October 19, 2012, is superseded.

Audience

Appeals technical employees

Effective Date

(01-06-2015)

John V. Cardone
Director, Policy, Quality and Case Support

8.6.5.1  (01-06-2015)
ID Theft Overview

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

    • ID Theft Overview: Discusses Appeals' policy, definitions of key terms, and resources available for considering ID theft claims.

    • ID Theft Referrals to Appeals: Discusses the ID theft referral process to Appeals including Form 14027-B, Identity Theft Case Referral, and Form 14103, Identity Theft Assistance Request.

    • Initial ID Theft Actions: Discusses inputting ID theft tracking indicators and taxpayer address changes.

    • Evaluating ID Theft: Addresses ID theft substantiation documentation and research for Appeals employees.

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

    • Appeals Technical Employee Closing Actions

8.6.5.1.1  (01-06-2015)
Appeals Policy

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

    • The Identity 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 ATE.

  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' consideration is limited to information available in the administrative file, the taxpayer's testimony during the Appeals conference, and information obtainable through the routine internal sources outlined in IRM 8.6.5.4.2

    • Appeals employees accessing the Accounts Management System (AMS) must adhere to ex parte communication rules in Revenue Procedure 2012-18 and IRM 8.1.10, Ex Parte Communications

    • The identity of the person committing identity theft is generally unknown to Appeals and Appeals does not investigate, or reach out to the person committing identity theft

  3. When an ID Theft Claim is received, the ATE should follow general Appeals procedures on handling new issues and new information beginning with IRM 8.6.1.6.4, New Issues Raised by Taxpayer.

  4. Identity theft cases are prioritized and worked expeditiously.

8.6.5.1.2  (01-06-2015)
Definitions and Explanations of Key Terms

  1. IDENTITY THEFT: A fraud that is committed or attempted using a person's identifying information without authority.

  2. 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.

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

    Type of ID Theft Affect on Tax Administration
    Employment or 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

    Refund-Related
    • ID thief uses the victim’s SSN to file a false federal income tax return to obtain 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

  4. RETURN PREPARER MISCONDUCT: Return preparer misconduct generally involves the orchestrated 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).

    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 Return Preparer Misconduct:

    1. Return Preparer Misconduct: A taxpayer used a preparer in 2013 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 2014, the taxpayer filed his own return and did not use a preparer. Without the taxpayer's knowledge or authority, a preparer he had used in 2013 filed a return using the victim’s SSN without his permission. In 2014, the taxpayer was an ID theft victim.

  6. TAXPAYER-WRONGFUL ACTOR: Adjustment processing terms for distinguishing between the taxpayer who is the victim of ID theft and the wrongful actor who used the taxpayer's SSN to obtain a fraudulent refund. When requesting ID theft tax adjustments, identify on the adjustment documents which transactions and credits belong to the taxpayer and which belong to the wrongful actor.

  7. NULLITY: Designation assigned to an invalid return filed by a wrongful actor. The Appeals Account and Processing Support (APS) will use IRM 3.28.4.9.1, Nullity Returns, and IRM 21.6.2.4.2.5, Streamline Identity Theft Case Processing (CAT7), when adjusting the account..

  8. APPEALS TECHNICAL EMPLOYEE (ATE): The Appeals Officer or Settlement Officer conducting the Appeals hearing.

  9. APPEALS ID THEFT SPECIALIZED UNIT: The Appeals Account & Processing Support (APS) unit is 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 web page http://appeals.web.irs.gov/tech_services/id-theft/default.htm.

  10. IDENTITY PROTECTION SPECIALIZED UNIT (IPSU): Unit within Wage & Investment Accounts Management that:

    • Assists taxpayers who are or may become ID theft victims

    • Refers cases to other IRS functions when an ID theft taxpayer has contacted the IPSU

    • Monitors taxpayer accounts that are open in more than one IRS function and follows up with the functions to make sure the ID theft issues are resolved

    See IRM 10.5.3.2.10.1, The Identity Protection Specialized Unit (IPSU) and Referrals to Other Functions on Form 14027-B, for more information on IPSU and its role in IRS's ID theft program.

8.6.5.1.3  (01-06-2015)
Resources

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

    • The Appeals ID theft web page 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 Protection Program

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

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

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

    • Liaison for ID theft referrals from IPSU

    The Appeals ID theft liaison/program analyst's name and contact information are shown on the Appeals ID theft web page.

  3. If a taxpayer asks the ATE for transcripts while the case is under Appeals' jurisdiction, see IRM 21.2.3.5.8, Transcripts and Identity Theft, for instructions on securing transcripts for taxpayers who were ID theft victims.

8.6.5.2  (01-06-2015)
ID Theft Referrals to Appeals

  1. The IPSU was established in 2008 to assist taxpayers who are or may become victims of ID theft. One of IPSU's responsibilities includes referring ID theft claims to Appeals to assist taxpayers with an open appeal who have already had their tax accounts impacted by identity theft but have not yet had their issues resolved.

  2. IPSU will refer an ID theft claim and any supporting information, typically via secure email, to Appeals through the Appeals ID theft liaison.

  3. The Appeals ID theft liaison will email the complete referral package to the ATE assigned to the taxpayer's case and send a copy to that employee's manager.

  4. Single-period cases or multiple-period cases in which all periods are under the jurisdiction of one function are not monitored by IPSU. If a taxpayer's case meets IRM 10.5.3.2.3Multiple Function Criteria (MFC), then IPSU must monitor the case to ensure the ID theft issues are considered and will refer the ID theft claim to Appeals using a Form 14027-B.

  5. Appeals is only responsible to consider ID theft issues for the tax periods under its jurisdiction. See IRM 10.5.3.2.10.1.1, IPSU Monitoring Multiple Function Criteria (MFC) Accounts for procedures for making a referral to IPSU when Appeals identifies ID theft issues involving tax periods not under Appeals' jurisdiction.

8.6.5.2.1  (01-06-2015)
Form 14027-B, ID Theft Case Referral

  1. If the ID theft affects multiple tax periods AND requires potential corrective actions by more than one IRS function, a Form 14027-B, Identity Theft Case Referral will accompany the referral from IPSU. IPSU does not engage in any case-decision activities and will not disrupt the normal processing of the Appeals case or take adjustment actions on the cases it refers to Appeals. See IRM 8.6.5.5 below for information on making ID theft-related adjustments to cases under Appeals' jurisdiction.

  2. IPSU will periodically follow up with the Appeals liaison on the status of the referral. In response, the Appeals ID theft liaison may follow up with the Appeals employee to verify the status of the claim.

  3. See IRM 8.6.5.6.1 below for details on closing Form 14027-B referral cases.

8.6.5.2.2  (01-06-2015)
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 Taxpayer Advocate Service (TAS) Criteria 5 - 7, a referral is made on Form 14103. See IRM 13.1.7, Taxpayer Advocate Service (TAS) Case Criteria, for information on TAS Criteria 5 - 7 systemic burden cases. IPSU might include its recommended action on the Form 14103.

  2. The Appeals ID theft liaison will email the referral package to the ATE handling the taxpayer's case and send a copy to that employee's manager.

  3. Upon receipt of the Form 14103, the ATE will take the following actions:

    1. Acknowledge receipt of the Form 14103 within five (5) business days via secured email or the fax number provided by the IPSU employee in Section II, Box 3 of the form.

    2. Process the identity theft case as priority

    3. Review Section IV, Specific Assistance Requested, determine whether the requested completion date is reasonable, and contact the IPSU employee listed in Section II of the form if additional time is needed.

  4. The ATE must consider the taxpayer's ID theft issue in a fair and impartial manner independent of actions recommended by other IRS employees, including those from IPSU and TAS. IPSU may provide a recommendation to Appeals along with details supporting their position, but Appeals is not bound by the IRM 10.5.3 requirements applicable to other IRS functions regarding reaching an agreement with IPSU on substantive case issues or recommended actions.

  5. IPSU will periodically follow up with the Appeals liaison on the status of the referral. In response, the Appeals ID theft liaison may follow up with the Appeals employee to verify the status of the claim.

  6. See IRM 8.6.5.6.2 below for details on closing Form 14103 referral cases.

8.6.5.3  (01-06-2015)
Initial ID Theft Tracking Actions for Appeals Technical Employees

  1. Identity theft tracking indicators are used to mark both tax-related and non-tax related identity theft incidents and help identify open and closed cases. Some action codes are used to track the progression of inventory, while others provide taxpayer protections once the tax related identity theft issue is resolved.

  2. ID theft tracking indicators are:

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

    • Displayed on IDRS via command codes ENMOD or IMFOLE for Individual Master File (IMF) accounts, and on the TXMOD for the specific Master File Tax (MFT) and period(s) for Business Master File (BMF) accounts.

  3. Appeals is responsible for different tracking actions depending on whether the ID theft issue initially surfaces in Appeals, or was referred to Appeals by IPSU.

  4. ID Theft Issue Initiated in Appeals: When ID theft is initially alleged or suspected during Appeals' consideration of the case, the ATE must:

    1. Add Feature Code “ID” to the Appeals Centralized Database System (ACDS) work unit, and

    2. Mark the taxpayer's account in Integrated Data Retrieval System (IDRS) using an ID theft tracking indicator as described in the step tables found in IRM 8.6.5.3.2.1, IMF Tracking Indicators, and IRM 8.6.5.3.2.2, BMF Tracking Indicators.

  5. ID Theft Issue Referred to Appeals: When ID theft issues are referred to Appeals, the ATE must

    1. Add Feature Code “ID” to the Appeals Centralized Database System (ACDS) work unit, and

    2. Confirm the ID theft tracking indicator is properly placed on the taxpayer's account on IDRS.

  6. There are three stages of an ID theft claim in Appeals when the ATE must verify, input, or update the ID theft tracking indicator:

    1. ID theft is initially alleged or suspected (verify or input, as described below),

    2. ID theft supporting documents are provided, necessary but not provided, or not necessary, and

    3. ID theft determination is made.

8.6.5.3.1  (01-06-2015)
Updating ID Theft Victim's Address

  1. Ensure IDRS reflects the correct taxpayer address to prevent correspondence or refund issuance to the wrong address. If the address on ENMOD/IMFOLE is not the taxpayer's correct address, initiate an update after you have:

    1. Verified the taxpayer is an ID theft victim, and

    2. Confirmed the taxpayer is the SSN or Employer Identification Number (EIN) owner.

    Resolve incorrect address issues as early as possible.

  2. The Form 14039, IRS Identity Theft Affidavit, (for IMF cases) or Form 14039-B, Identity Theft Affidavit - Business, are not, by themselves, proof of ID theft. Do not initiate an address change based solely upon the Form 14039 or Form 14039-B.

8.6.5.3.2  (01-06-2015)
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 APS with the following information:

    • Taxpayer Identification Number (TIN) and name control

    • Tax year or Master File Tax (MFT) period affected by the ID theft incident, using format MMDDYYYY

    • The appropriate TC and AC code as shown in the tables in the below IRM sections

    Note the following in the Miscellaneous field:

    • BOD/Function code: AP

    • Program Name: AP

    • Tax Administration Source Code: See the tables in the below IRM sections

  2. Do not request a TC 971 AC 501 input until 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.

8.6.5.3.2.1  (01-06-2015)
IMF Tracking Indicators

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

    If... Review... And input...
    Taxpayer initiated ID theft allegation IRM 10.5.3.2.5.1 TC 971 AC 522 with Tax Administration Source Code:
    • PNDCLM

    IRS initiated suspicion of ID theft IRM 10.5.3.2.5.2 TC 971 AC 522 with Tax Administration Source Code:
    • IRSID

    Note:

    Prior to inputting either of these indicators, 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.

  2. See IRM 10.5.3.2.5 for instructions when the ID theft victim is the secondary SSN on a jointly filed return.

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

    If... Review... And input...
    ID theft supporting documents are provided by the taxpayer IRM 10.5.3.2.6.3 TC 971 AC 522 with the appropriate Tax Administration Source Code listed in IRM Exhibit 10.5.3-12
    ID theft supporting documents were required and requested from the taxpayer but not provided within deadline IRM 10.5.3.2.7 TC 972 AC 522 with Tax Administration Source Code:
    • NORPLY

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

    If... Review... And input...
    ID theft did not occur. IRM 10.5.3.2.7 TC 972 AC 522 with Tax Administration Source Code:
    • NOIDT

    ID Theft affecting tax administration is confirmed and all corrective actions taken. IRM 10.5.3.2.8 and IRM 10.5.3.2.9 TC 971 AC 501 to close the ID theft claim with the appropriate Tax Administration Source Code listed in IRM Exhibit 10.5.3-4

8.6.5.3.2.2  (01-06-2015)
BMF Tracking Indicators

  1. Servicewide ID theft procedures were recently updated to include BMF identity theft. See IRM 10.5.3.3, BMF Identity Theft Procedures. Examples of BMF ID theft include:

    • Employment tax returns filed to substantiate income on an individual tax return - identity thief uses victim's SSN/EIN to obtain an EIN, which is used to file a fictitious employment tax return to support a fictitious Form W-2 or Form 1099

    • Refundable credit - identity thief uses an EIN to file fictitious tax return to claim a refundable credit

    • EIN request - identity thief uses victim's personal information to request an EIN, which is then used to file false tax returns

  2. With BMF ID theft, it is important to rule out a mixed entity or successor corporation, and to locate any possible cross reference.

  3. Guidance for inputting the BMF ID theft indicators at three specific intervals is shown in IRM Exhibit 10.5.3-19, BMF ID Theft Indicators, and below:

    If... Review... And input...
    Taxpayer initiated ID theft allegation, or Appeals initiated suspicion of ID theft IRM 10.5.3.3.4.1 and IRM 10.5.3.3.5 TC 971 AC 522 with Tax Administration Source Code:
    • AP IDTCLM

    Taxpayer provided documentation received IRM 10.5.3.3.4.1 and IRM 10.5.3.3.6 TC 971 AC 522 with Tax Administration Source Code:
    • AP IDTDOC

    ID theft issue resolved IRM 10.5.3.3.4.1 and IRM 10.5.3.3.13 TC 971 AC 522 with Tax Administration Source Code:
    • AP CLSIDT

  4. Prior to inputting the "AP IDTCLM" indicator, research TXMODA to see if it has already been input by another IRS function for the same MFT and period. If it has, do not request a duplicate indicator.

8.6.5.3.3  (01-06-2015)
Reversing IMF and BMF ID Theft Tracking Indicators

  1. A TC 971 AC 501 closes out an IMF ID theft claim. The following table reflects instances in IMF cases in which it may be necessary to manually reverse the TC 971 AC 501:

    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 it is negatively affecting 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 was determined to be fraudulent
    OTHER Reason for the reversing TC 971 does not meet any of the reasons 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 for reversal from the above table

  3. See IRM 10.5.3.2.9.2, Manually Reversing TC 971 AC 501, and IRM Exhibit 10.5.3-5, IMF Only TC 972 AC 501 - Reversal of TC 971 AC 501, for more information on reversing TC 971 AC 501 in IMF cases.

  4. For ID theft cases involving a BMF entity, see IRM 10.5.3.3.6.3, Reversing Pending Identity Theft Claims - TC 972 AC 522 NORPLY or NOIDT, and IRM Exhibit 10.5.3-22, Reversing BMF Identity Theft Indicators - TC 972 AC 522.

8.6.5.4  (01-06-2015)
Evaluating ID Theft

  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, with a Tax Administration Source Code INCOME, MULTFL, INCMUL, NOFR or OTHER on the account in the prior 3 years. Before requesting substantiation documentation from an IMF taxpayer, check ENMOD/IMFOLE for:

    • TC 971 AC 501 to see if the IMF taxpayer suffered a substantiated ID theft incident in the prior 3 years. See also IRM 10.5.3.2.9 , Closing Taxpayer Initiated Identified Identity Theft Affecting Tax Administration - TC 971 AC 501, Documentation Provided.

    • TC 971 AC 506 to see if the IMF taxpayer suffered an ID theft incident in the prior 3 years. See also IRM 10.5.3.2.11, IRS-Identified Identity Theft Affecting Tax Administration - TC 971 AC 506.

    • TC 971 AC 522 with the applicable Tax Administration Source Code from IRM Exhibit 10.5.3-12, IMF Only TC 971 AC 522 Tax-Related Identity Theft, Case Status (Initial Claim/Suspicion and Supporting Documents), to see if any other IRS business unit substantiated the IMF ID theft incident. See also IRM 10.5.3.2.6.3, Marking Taxpayer Accounts When Accepting Identity Theft Supporting Documents.

    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 Source Code.

  2. Before requesting substantiation documentation from a BMF taxpayer, check TXMODA/BMFOLT for the specific tax period for a TC 971 AC 522 with Tax Administration Source Code IDTDOC to see if any other IRS business unit substantiated the BMF ID theft incident

  3. 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.

8.6.5.4.1  (01-06-2015)
ID Theft Substantiation Documentation

  1. 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. Support for ID theft: Form 14039(IMF)/Form 14039-B (BMF), or a copy of a police report indicating ID theft as the issue.

      Note:

      The IRS affidavit for IMF taxpayers is also available in Spanish as Form 14039(SP).

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

8.6.5.4.2  (01-06-2015)
Internal Resources

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

      See the IDRS Command Codes Job Aid for additional information on these and other IDRS command codes.

    • RGS: Report Generation Software

  2. Use discretion and try to tailor the need for documentation to suit the particular case so that the taxpayer is not burdened.

    Example Additional documentation needed?
    Taxpayer disputes an unreported Form 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.
  3. IRM 10.5.3.3.3, Preliminary BMF Research, contains internal source information, some of which the ATE may pursue when considering BMF ID theft claims. See IRM 8.6.5.1.1 for Appeals' policy about not being bound by Servicewide ID theft investigative requirements.

8.6.5.5  (01-06-2015)
Adjusting ID Theft liabilities

  1. The ATE 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 Appeals is dependent on the complexity of the adjustment. Tax computations are generally not necessary when Form 3870, Request for Adjustment, is sufficient to adjust a taxpayer's account.

  3. ALL adjustments attributable to ID theft must be routed to and performed by Appeals' ID Theft Specialized Unit in Brookhaven APS. The mailing and email addresses of the specialized unit are found on a document titled "Routing ID theft Tax Adjustments" on the Appeals ID theft website

  4. Unless the ATE 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 wrongful actor

    • Assumes Appeals verified the taxpayer

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

  5. 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.

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

8.6.5.5.1  (01-06-2015)
Income Related Adjustment

  1. When it is confirmed that an ID thief used the taxpayer's SSN to earn income, the ATE 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 wrongful 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 8.6.5.3.2
    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 Form 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.

8.6.5.5.2  (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 ATE 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 wrongful transaction(s) that must come off of the account. Address any refunds, prepayment credits or payments on the account.

    Example:

    The wrongful actor received a fraudulent refund or the fraudulent refund is frozen on the account or was offset to another year for which the taxpayer owes. In all those instances, direct APS to reverse the fraudulent refund.

    Example:

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

    2 Prepare Form 4844 for APS to input TC 971 AC 501 after the account is fully adjusted. See IRM 8.6.5.3.2
    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.

8.6.5.5.3  (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 ATE 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 wrongful transaction(s) that must come off of the account. Address any refunds, prepayment credits or payments on the account.

    Example:

    The wrongful actor received a fraudulent refund or the fraudulent refund is frozen on the account or was offset to another year for which the taxpayer owes. In all those instances, direct APS to reverse the fraudulent refund.

    Example:

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

    2 Prepare Form 4844 for APS to input TC 971 AC 501 after the account is fully abated/adjusted. See IRM 8.6.5.3.2
    3 Attach a copy of the taxpayer's "duplicate" TC 976 return (paper only) 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.

8.6.5.5.4  (01-06-2015)
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-PQCS-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 ATE that an adjustment cannot be made due to a -L freeze, the ATE will advise APS to reverse the TC 420 and then request it be reinput after the adjustment posts.

8.6.5.6  (01-06-2015)
ID Theft Closing Actions - Appeals Technical Employees

  1. If Appeals determines the taxpayer is an ID theft victim, ensure IDRS reflects the taxpayer's correct address before closing out the case. See IRM 8.6.5.3.1 above for address change guidance.

  2. If adjustments are necessary do not close the case through your local APS unit. Brookhaven APS is Appeals' Specialized ID Theft Unit and will perform the necessary adjustments and closing actions. Brookhaven APS's mailing and email addresses are found on a document titled "Routing ID theft Tax Adjustments" on the Appeals ID theft website.

  3. The ATE's closing actions depend on whether the ID theft issues was initially raised while in Appeals, referred to Appeals, and how it was referred to Appeals. The following sections address specific actions needed for closing ID theft cases in Appeals.

8.6.5.6.1  (01-06-2015)
Closing Form 14027-B Referral Case

  1. At the conclusion of the ATE's consideration of the case, the ATE will close the Form 14027-B ID theft referral by:

    1. Completing parts V, VI and VII of the form to reflect the results of the referral, and

    2. Emailing or faxing the completed form back to Appeals ID theft liaison. See the Appeals ID theft web page at http://appeals.web.irs.gov/tech_services/id-theft/default.htm for Appeals ID theft liaison name and contact information.

  2. Close the Appeals case using standard closing procedures. If adjustments attributable to ID theft are needed, the case must be routed through Brookhaven APS for the adjustment and case closing actions. See IRM 8.6.5.5.

  3. The above actions to close out the Form 14027-B ID theft referral may be done by the ATE concurrent with submitting the case to the Appeals manager.

8.6.5.6.2  (01-06-2015)
Closing Form 14103 Referral Case

  1. At the conclusion of the case, the ATE closes a Form 14103 ID theft referral by:

    1. Completing Sections V and VI of the form

    2. Emailing or faxing the completed form back to the originating IPSU employee.

    3. Alerting the Appeals ID theft liaison by email that the referral is closed. See the Appeals ID theft web page at http://appeals.web.irs.gov/tech_services/id-theft/default.htm for Appeals ID theft liaison name and contact information.

  2. Close the Appeals case using standard closing procedures. If adjustments attributable to ID theft are needed, the case must be routed through Brookhaven APS for the adjustment and case closing actions. See IRM 8.6.5.5.

  3. The above actions to close out the Form 14103 ID theft referral may be done by the ATE concurrent with submitting the case to the Appeals manager.

8.6.5.6.3  (01-06-2015)
Closing Non-Form 14027-B/14103 Referral Case

  1. If IPSU referred the case to Appeals and all ID theft tax years or periods are under Appeals' jurisdiction, then this is a single-function referral and there is no Form 14027-B associated with the case. If there is no Form 14027-B or Form 14103, the ATE will notify the Appeals ID theft liaison of the ID theft determination and close the case using standard closing procedures.

  2. If adjustments attributable to ID theft are needed, the case must be routed through Brookhaven APS for the adjustment and case closing actions. See IRM 8.6.5.5.

8.6.5.6.4  (01-06-2015)
Closing Appeals Initiated ID Theft Case

  1. Cases with ID theft issues identified while the case was under Appeals' jurisdiction may be closed using standard closing procedures. The ATE will notify the Appeals ID theft liaison of the ID theft determination.

  2. If adjustments attributable to ID theft are needed, the case must be routed through Brookhaven APS for the adjustment and case closing actions. See IRM 8.6.5.5.

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
    PGLD 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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