The IRS (https://www.irs.gov/individuals/understanding-your-letter-5747c) likely wants you to verify your tax return to prevent fraud and protect you from identity theft. A letter (such as 5071C or 5747C) is sent because their system flagged your return as suspicious, perhaps due to a name/SSN match with a fraudulent return, a change in your address, or a data breach. The IRS will not process your return or issue a refund until you verify your identity.
The IRS scrutinizes tax returns to look for signs of fraudulent activity. One of the most common tax scams is another individual using your name and Social Security number to file a fraudulent tax return. If you were a potential victim of tax fraud, you may receive an ID verification letter.
Many people mistakenly assume that if their tax return is selected for ID verification, it means that there was something wrong with their tax return. The truth is that the IRS select returns at random for ID verification.
The IRS receives copies of your W-2s and 1099s, and their systems automatically compare this data to the amounts you report on your tax return. A discrepancy, such as a 1099 that isn't reported on your return, could trigger further review. So, if you receive a 1099 that isn't yours, or isn't correct, don't ignore it.
Not reporting all of your income is an easy-to-avoid red flag that can lead to an audit. Taking excessive business tax deductions and mixing business and personal expenses can lead to an audit. The IRS mostly audits tax returns of those earning more than $200,000 and corporations with more than $10 million in assets.
If you don't call or go online to verify your identity with the IRS, the IRS will be unable to process your return, issue refunds or credit any overpayments.
If the IRS decides that your return merits a second glance, you'll be issued a CP05 Notice 1 . This notice lets you know that your return is being reviewed to verify any or all of the following: Your income. Your tax withholding.
Overview. Letters 5071C, Potential Identity Theft During Original Processing with Online Option, is mailed to taxpayers to notify them that the IRS received an income tax return using your name, Social Security number (SSN) or individual taxpayer identification number (ITIN).
Successfully e-Verified / Verified: This is the status when you have submitted and duly e-Verified / Verified your return, but the return has not been processed yet. Processed: This is the status when your return is successfully processed.
Be ready to verify your identity when calling the IRS
Request an expedited refund by calling the IRS at 800-829-1040 (TTY/TDD 800-829-4059). Request a manual refund expedited to you.
If you do not verify in time, your return is treated as not filed and it will attract all the consequences of not filing ITR under the Income Tax Act, 1961. However, you may request condonation of delay in verification by giving appropriate reason.
An IRS audit is a review/examination of an organization's or individual's books, accounts and financial records to ensure information reported on their tax return is reported correctly according to the tax laws and to verify the reported amount of tax is correct.
The IRS may send these identify fraud letters to taxpayers:
Letter 5071C, Potential Identity Theft with Online Option: This tells the taxpayer to use an online tool to verify their identity and tax return information. If the taxpayer didn't file, they can let the IRS know with the online tool.
Refund processing by the tax department starts only after the return is e-verified by the taxpayer. Usually, it takes 4-5 weeks for the refund to be credited to the account of the taxpayer.
And annoyingly, there's no way of finding out the reason for the delay until the IRS is ready to tell you. However, there is also no need to worry. Oftentimes the delay is simply resolved and your refund is processed as expected – albeit later than you'd hoped.
The IRS is considering changing an amount on your tax return, due to an examination after it processed your tax return. This is called an audit. If it audits your return, the IRS will notify you by mail, and the notice will tell you if the audit will be handled by mail or in person.
IRS Audit Red Flags 2023: 25 Tax Return Audit Risk Factors
The identity verification process from the IRS can be triggered on a random basis, or it could be due to suspicion that a tax return with your name on it is potentially the result of identity theft.
Common IRS audit triggers
Self–Service: The fastest method to verify; usually takes 5-10 minutes. For step-by-step instructions, visit Verifying your identity with ID.me Self-Service. Video call: You will upload your document, then join a quick video call.