We’re going to give the IRS its own treatment here. That’s because it is a complex bureaucracy that has enormous impact on your life. You may have been affected when someone worked, or won money in Las Vegas, under your Social Security number and didn’t or doesn’t pay taxes. The IRS and even your state tax board will come after you. A fraudster might have filed a false tax return and received an undeserved refund before you had a chance to file. At the University of California, Irvine, where I teach, more than a hundred graduate students couldn’t file their tax returns because impostors had used this last scheme.

Here are some red flags to let you know you may have a tax-fraud problem:

Should the IRS think that you owe taxes and attempt to collect them, here’s what it can do:

So if you get a letter from the IRS (or your state tax authority), you must act immediately. Because of its broad powers to collect money owed, your highest priority is to call and deal with the taxing authorities immediately, before any other creditor. Your financial life depends on it!

If someone has used your Social Security number for tax purposes, then you need to call the IRS special identity-theft number, 800-908-4490, and send a follow up letter to the IRS with your police report and affidavit. Also complete IRS form 14039 (available at irs.gov). Include a copy of the letter you sent to the Social Security Administration. Ask for a copy of the tax returns and all documentation and correspondence that they may have regarding the fraud. You may need to visit a local IRS office as part of straightening out the problem.

Examine the documents received from the IRS, paying attention to the time periods of employment, salaries reported, and any other information that will show you never worked in those positions. You’ll need to get contact information for the thief’s employers. Call the employers, following up in writing, and request all potential evidence, including job applications and personnel forms.

You’ll then need to explain the fraud and notify the IRS and tax authorities in the state in which your impostor worked. Give evidence of your own employment or income during the pay period in question. Provide your paystubs, W-2s, or 1099s during the same time to show that you worked elsewhere. The toll-free IRS assistance number for individuals is 1-800-829-1040. If your fraudster caused problems with your small business, call 1-800-829-4933.

You must contact your state’s Department of Revenue and follow similar procedures. The particulars and address will vary with the state, so contact the appropriate agency and request information on how it handles identity theft. You may save time by sending a cover letter with a copy of your letter and attachments which you previously sent to the IRS.

For further help, contact the IRS Taxpayers Advocate Service, an office focused on acting as the representative of taxpayers in the agency. You can find more information at www.irs.gov/advocate. The Contact Your Advocate link will give you the proper contact information for your state’s office, or you can call 1-877-777-4778.

If you still are having problems, contact the U.S. Treasury Inspector General for Tax Administration (TIGTA), which provides independent oversight of IRS activity. TIGTA can open an investigation if an issue falls into one of three categories, one of which is “external attempts to corrupt tax administration.” That includes people fraudulently reporting information. Click the Contact link on the website to find the regional offices as well as contact information for the Fraud and Criminal Intelligence Division.

The worst-case scenario is if the IRS has filed a lien for money it thinks you owe for taxes. In that case, not only do you need to do all of the above, but also deal with the lien. If the taxing agencies will not take action to remove the lien (which they should do), you will need to contact a tax attorney to help you in the courts.

Your credit reports will show a tax lien and in what court it was filed. Call the court and ask how to get a copy of the entire court file. You’ll have to pay for copies unless you can get them electronically.

Part of the record will be the contact information for the lawyer handling the case for the IRS. Contact the lawyers with the details listed at the beginning of this chapter and explain the situation, providing a copy of what you sent to the IRS. You’ll need to discuss the steps to remove the lien with both the assigned IRS agent and lawyer. If it is from fraud, the IRS lawyer should do the court paperwork. If the IRS refuses to remove the lien, you will need your own lawyer. See Chapter 16 for details on handling civil court cases and liens, specifically an IRS lien.