8.6.5. Identity Theft Procedures

(1) This IRM provides information and instruction to Appeals Technical Employees (ATE) working Identity (ID) theft claims.

(2) Identity theft occurs when someone uses an individual’s personal information or business’s identifying information, such as name, Social Security Number (SSN), or other identifying information without permission, to commit or attempt fraud.

(3) Taxpayers may notify the IRS when they believe they have experienced an identity theft incident. In these instances, taxpayers must provide documentation to establish that they are identity theft victims.

(4) Appeals will generally see two types of identity theft

• Employment or Income Related - This occurs when the identity thief uses the victim’s SSN to obtain employment, resulting in what may appear as unreported income under the victim's account

• Refund Related - This occurs when the identity thief uses the victim’s SSN to file a false federal income tax return to obtain a refund. If the thief files before the victim, the victim may not receive his or her refund within a reasonable time frame.

(5) ID theft arises as an issue in Appeals when:

• Identity Theft Victim Assistance (IDTVA), Accounts Management, or Compliance receives a taxpayer's ID theft affidavit with an open Appeals case and makes a determination that the identity theft complaint is invalid or that the taxpayer is confirmed a victim.

• The taxpayer raises the issue to the ATE while the case in under Appeals’ consideration.

(6) Refer to IRM 25.23, Identity Protection and Victim Assistance, for servicewide guidance on identity theft.

(7) Refer to IRM 25.23.2, Identity Protection and Victim Assistance - General Case Processing, for information and guidance regarding required documentation and actions for processing identity theft claims.

(8) Refer to IRM 25.23.10, Compliance Identity Theft Case Processing, for procedures specific to cases involving Compliance issues.

(1) When taxpayers believe they are victims of identity theft, they are required to provide documentation to prove the identity theft.

(2) Taxpayers are not required to provide substantiation if 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.

• TC 971 AC 506 to see if the IMF taxpayer suffered an ID theft incident in the prior 3 years.

• TC 971 AC 522 with the applicable Tax Administration Source Code to see if any other IRS business unit substantiated the IMF ID theft incident.

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

(4) When taxpayers make an identity theft complaint, the account will be marked with TC 971 AC 522 reflecting receipt of documentation using the appropriate Tax Administration Source Code (INCOME, MULTFL, INCMUL, OTHER, or NOFR). Refer to Exhibit 8.6.5-1.

(5) Refer to IRM 25.23.2.18, Identity Theft Support Documentation - Overview for documentation requirements. If there's no record of a prior substantiated ID theft incident, request that the taxpayer provide the following substantiation documentation within 30 days for Individual Master File (IMF) Cases:

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) in certain situations (refer to IRM 25.23.9.7, Form 14039-B, BMF Identity Theft Affidavit), 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).

(6) 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.

(7) For Business Master File Cases (BMF), requests for information are only be made when an identity theft determination cannot be made based solely on internal research by Compliance. Accordingly, when the taxpayer raises identity theft in a BMF case, follow the guidance for making a referral in accordance with the type of case in the proceeding sections.

(8) 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.

(9) 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 periods for Business Master File (BMF) accounts.

(10) Refer to IRM 25.23.2.16, Tracking and Reporting Identity Theft Cases - Identity Theft Indicators, for tracking and reporting codes.

(11) Refer to IRM 25.23.2.8, When to Update the Victim's Address, for considerations on updating the taxpayer’s address.

(1) When identity theft claims are determined to be invalid, taxpayers are issued appeal rights through the normal compliance process as appropriate. Appeals will consider any underlying tax issues.

(2) Refer to IRM 25.23.10.10, Invalid Identity Theft Determination.

(3) ATEs are not the first finders of fact. Appeals will consider ID theft issues after they have been investigated by Compliance.

(1) If a taxpayer raises identity theft as an issue in a non-docketed case in Appeals that has not previously been considered by the Service, follow the procedures in IRM 8.6.1.6.4, Taxpayer Raises New Issue. Place Feature Code "ID" on Appeals Centralized Database System (ACDS).

(2) If a taxpayer provides new information with respect to an unproved Identity Theft complaint that was never previously provided to Compliance, then follow the procedures in IRM 8.6.1.6.5, Taxpayer Provides New Information. Place Feature Code "ID" on ACDS.

(1) When a taxpayer raises potential ID theft in a field sourced case or a Business Master File (BMF) case that has not been previously considered or provides new information with regard to the ID theft claim in a docketed case, the ATE will follow the Docketed Exam Assistance procedures in IRM 8.4.4, Appeals Docketed Cases, Examination Assistance Requests. Place Feature Code "ID" on ACDS.

(2) When a taxpayer raises potential ID theft in an Individual Master File (IMF) campus sourced case that has not been previously considered or provides new information with regard to the ID theft claim in a docketed case, the ATE will refer it to IDTVA-C for review and determination. Place Feature Code "ID" on ACDS.

(3) The ATE will prepare Form 3177, "Notice of Action for Entry on Master File", instructing APS to input TC 971 AC 522 with Tax Administration Source Code "PNDCLM" for each year ID theft is claimed.

(4) The ATE will immediately notify the Counsel Attorney assigned to the case (or the Associate Area Counsel if an attorney has not been assigned) when it is learned that the petitioner is claiming to be an identity theft victim.

(5) The ATE will prepare a package to refer to the IDTVA-C mailbox.

(6) The package will include:

1. Form 10467, Appeals Division Feedback Report and Transmittal Memorandum, indicating that this is part of a docketed case.

2. Form 14039, Identity Theft Affidavit, or police report submitted by the taxpayer.

3. Government issued identification of the taxpayer. Refer to IRM 25.23.2.18, Identity Theft Supporting Documentation - Overview, for details.

4. All supporting documentation submitted by the taxpayer.

5. For BMF taxpayers, refer to IRM 25.23.9.5, Identity Theft Case Building- BMF.

(7) The ATE will forward the package by secure email for review to the Compliance IDT Liaison at “*SBSE CCS BSC EXAM IDT” with read receipt.

(8) IDTVA-C will mark these requests as priority and will make every attempt to make a determination within 45 days. A follow up email should be sent if no response is received in 45 days.

(9) If the complaint for identity theft is determined invalid by IDTVA-C, they will provide the decision to the ATE by secure email.

(10) If the complaint for identity theft is determined to be valid by IDTVA-C, they will provide the ATE with a detailed description of the relief granted by secure email.

(11) Depending on the category and type of adjustments needed, the ATE will prepare:

1. Form 3870, Request for Adjustment, identifying the account adjustments and to post the TC 501 Reason Code 139. Refer to IRM 25.23.10.10.12, Account Adjustments.

2. Form 3177, Notice of Action for Entry on Master File, to post the TC 501 or TC 506 with the applicable Tax Administration Source Code, see IRM 25.23.2-2, IMF Only TC 971 AC 501 — Taxpayer Initiated Identity Theft Case Closure (Tax-Related) - TC 971 AC 501.

3. Form 2363, Master File Entity Change, to update the Name, Address, or Filing Status.

4. If necessary, Form 9409, IRS/SSA Wages Worksheet, to report any corrections to Social Security wages, see IRM 25.23.10.9.6, Form 9409, for more information.

(12) When tax computations are necessary, the ATE will have a Tax Computation Specialist (TCS) prepare the Form 5278 and Form 5403 Instructions.

(13) See IRM 25.23.4, Account Paper Process, for necessary actions when performing account adjustments.

(14) The ATE will resolve the remainder of the case as appropriate using existing procedures.

(15) If you determine your taxpayer was a victim of ID theft and adjustments are necessary (interim adjustments or adjustments made at closing), send the necessary documents via encrypted email to "AP-COS-APS-East-HOL ACDS Update Request" or to:
Brookhaven APS
IRS Appeals
1040 Waverly Avenue, Stop 906
Holtsville, NY 11742-1129

(1) When a taxpayer raises potential ID theft that has not been previously considered or provides new information with regards to the ID theft claim in a CDP case, the ATE will refer it to IDTVA-C for review and determination. Place Feature Code "ID" on ACDS.

(2) The ATE will prepare Form 3177, Notice of Action for Entry on Master File, instructing APS to input TC 971 AC 522 with Tax Administration Code PNDCLM for each year ID theft is claimed.

(3) The ATE will prepare a package to refer to the IDTVA-C mailbox.

(4) The package will include:

1. Form 10467, Appeals Division Feedback Report and Transmittal Memorandum, indicating that this is part of a CDP case.

2. Form 14039, Identity Theft Affidavit, or police report submitted by the taxpayer.

3. Government issued identification of the taxpayer. Refer to IRM 25.23.2.18, Identity Theft Supporting Documentation - Overview, for details.

4. All supporting documentation submitted by the taxpayer.

5. For BMF taxpayers, refer to IRM 25.23.9.5, Identity Theft Case Building- BMF and IRM 8.6.5.2, Identity Theft General Documentation Requirements.

(5) The ATE will forward the package by secure email for review to the Compliance IDT Liaison at “*SBSE CCS BSC EXAM IDT” with read receipt.

(6) IDTVA-C will mark these requests as priority and will make every attempt to make a determination within 45 days. A follow up email should be sent if no response is received in 45 days.

(7) If the complaint for identity theft is determined invalid by IDTVA-C, they will prepare a reply to notify the taxpayer of the decision and send a copy to the ATE by secure email.

(8) If the complaint for identity theft is determined to be valid by IDTVA-C, they will make the necessary account adjustments and provide the ATE with a detailed description of the relief granted by secure email.

(9) The ATE will resolve the remainder of the case as appropriate using existing procedures.

(1) Follow the procedures in IRM 8.6.5.6 and identify the type of case on Form 10467, Appeals Division Feedback Report and Transmittal Memorandum, and place Feature Code "ID" on ACDS.

(1) When it is determined that the taxpayer was a victim of identity theft, the Service may:

• Nullify a return not filed by the taxpayer

• Concede adjustments for income items not belonging to the taxpayer

• Provide audit reconsideration

• Move a posted return, not filed by the owner of the SSN,to an IRSN if the return is not deemed a nullity

(2) Refer to IRM 25.23.2.6.2, Nullifying Returns.

(3) Refer to IRM 25.23.4, Accounts Paper Process, for account actions to be taken for valid ID theft claims.

(1) Before closing a valid ID theft case, the ATE must (if applicable):

1. Make sure the correct address for the ID theft victim is on file. Refer to IRM 8.6.5.9.1.

2. Input or update ID theft tracking indicators. Refer to IRM 8.6.5.9.2.

3. Update the ID theft tracking indicators. Refer to IRM 8.6.5.9.3.

(1) There may be instances where Appeals confirms that the taxpayer is a victim of identity theft and will need to instruct APS to make account adjustments.

(2) Refer to IRM 25.23.4, Account Paper Process, for necessary actions when performing account adjustments.

(3) 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.

(4) 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.

(5) 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 the Appeals ID theft website

(6) The ATE will work with APS to rectify problems with account adjustments when needed.

(1) 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
IT	Information Technology
OS	Operations Support
PPDS	Identity Protection Strategy & Oversight formerly 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)
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
IVO	Integrity & Verification Operations formerly Accounts Management Taxpayer Assurance Program (AMTAP)
LBI	Large Business & International
OPIP	Office of Privacy & Information Protection
PHSH	Phishing
PREREF	Pre-Refund Program
RC	Refund Crime
RFND	Refund Scheme
RICS	Return Integrity & Compliance 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.