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According to the Treasury Inspector General for Tax Administration (TIGTA) report No. 2016-40-065, during the period February 2011 to December 2015, the Internal Revenue Service (IRS) identified almost 1.1 million taxpayers who were victims of employment-related identity theft. Employment-related identity theft is when an identity thief uses a stolen social security number of a taxpayer when applying for employment.

According to the TIGTA report, most taxpayers will realize they have been a victim when the IRS sends them a notice alerting them that there is a discrepancy in the income reported on their tax return and the information the IRS received through its Automated Underreporter Program. It seems the IRS would be in a position to notify affected parties, however, according to TIGTA, the IRS has not developed a process to ensure that the Social Security Administration is informed of any fraudulent wages that they find.

TIGTA has since recommended that the IRS develop a process to identify all victims of employee-related identity theft and include those identified before 2017. The IRS has agreed to launch a new notification process March 15, 2017, and will evaluate the process after the first year and decide how to handle previously identified victims.

By Lawrence Yee, CPA