In a world where identity theft poses a significant threat to taxpayers, tax professionals must be vigilant and proactive in safeguarding their clients’ sensitive information. One critical tool for achieving this is understanding the implications and purpose of the IRS Letter 6042C. In this in-depth article, we will explore the details of IRS Letter 6042C, outlining its role in protecting clients against identity theft, and offering guidance on how to respond and navigate this important notice. By being well-informed about IRS Letter 6042C, you can provide your clients with the peace of mind they need, further enhancing your reputation as a knowledgeable and diligent tax expert in an increasingly complex tax landscape.
The IRS has a message for tax preparers. They recently shared a concern about a rise in identity theft attempts against employers. The IRS is so concerned, in fact, that it is issuing advice directly to business owners.
Don’t expect your clients to find out about this on their own. Many won’t. Step up and warn them as soon as possible to be on the lookout to protect their businesses against contemporary methods being used to commit tax fraud.
Identity theft is nothing new. It’s been around in various forms on both the personal and professional levels for decades, and those targeted can expect a huge challenge to repair the damage. It takes a tremendous amount of work. In some cases it’s impossible.
How Do These Sneaky Thieves Steal Identities?
With all the checks and balances in place, how are thieves still getting away with identity theft? Good question. It’s not such a big surprise when you consider all the savvy technical advances over the last ten years. Modern-day thieves have sophisticated tools at their fingertips. Between their sneaky methods and victim negligence, identity theft is still a major issue for millions.
A 2018 online survey by The Harris Poll found that nearly 60 million Americans have been affected by identity theft. Almost 15 million people experienced identity theft in 2017.
Your Client Could Be the Next Victim
Do your clients know how truly vulnerable they are? Not just your individual clients, but also your business clients? Some don’t have a clue.
Every day, more criminals find their way to company names and under-protected EINs and use them to file fraudulent returns.
One way they do it is by creating fake W-2 Forms and filing fraudulent individual tax returns with stolen Employer Identification Numbers (EINs).
And guess what? They’ve also used EINs to obtain credit cards or open new lines of credit.
Increase in Fraudulent Filings
Fraudulent filings are increasing, and forms 1120, 1120S and 1041, as well as Schedule K-1, are being targeted.
Are There Any Red Flags?
There are always red flags. Take steps immediately if:
- Client receives 5263C or IRS letter 6042C
- Extension to file request is rejected because a return with the EIN or Social Security number (SSN) is already on file
- An e-filed return is rejected because a duplicate EIN/SSN is already on file
- An unexpected tax transcript or IRS notice that doesn’t correspond to anything the legitimate filer submitted
- Failure to receive expected and routine correspondence from the IRS (because the thief has changed the real taxpayer address)
The First Line of Defense
Awareness is critical if taxpayers are going to protect themselves. The first line of defense is caution. Remind your clients of the importance of reviewing their passwords. Teach them how to assign and store their passwords to keep them safe.
The IRS and members of the tax industry are also doing their part to help fight identity theft. The IRS is comparing specific data points from individual and business tax returns to identify suspicious filings by asking for additional information to help verify the legitimacy of tax returns.
You can help by advising your clients to contact the IRS when fraud is suspected. As liaison you can contact the IRS on their behalf. By the way, this is a service you can offer and be paid for.
