Later this month, the IRS  will be sending letters out to approximately 250,000 taxpayers that  contains their 6-digit “Identity Protection PIN.” Taxpayers will  receive this letter because they have informed the IRS that they were  the victims of identity theft which the IRS has confirmed after  reviewing documentation provided by the taxpayer.

The Identity Protection  PIN must be entered on the affected taxpayer’s Federal return in  order to avoid a delay in processing the return and receipt of their  refund.

If you learn that one of  your customers has been a victim of identity theft, you should ask  them if they received a letter from the IRS. If they have, ask them  to bring it with them when they come in to have their 2011 Federal  return prepared.

Things to know about the  Identity Protection PIN:

• If the taxpayer  received an Identity Protection PIN and it is not entered on their  return, the IRS will reject the return if it is filed  electronically.
• The Identity  Protection PIN received by the taxpayer this month is only valid for  use on their TY 2011 return.
• For an affected  taxpayer, if the Identity Protection PIN is entered incorrectly, the  processing of their return will be delayed.
• If the taxpayer  misplaces their letter and cannot remember their Identity Protection  PIN, they cannot obtain a new one from the IRS. In this case, they  will have to file their return on paper and the processing of their  return will be delayed while the IRS validates that the return filed  is the taxpayer’s.
• If both the taxpayer  and spouse receive an Identity Protection PIN, only the taxpayer’s  should be entered on the return.
• When the Identity  Protection PIN is entered in the CrossLink program, the PIN will be  transmitted to the IRS as part of Form 1040. It will also print on  Form 1040 in the area designated for this purpose in the signature  area of Form 1040.
• An affected taxpayer  will receive a unique 6-digit PIN each year for 3 years following  verification by the IRS.
• The Identity  Protection PIN should not be confused with the 5-digit  taxpayer/spouse electronic self-select PIN.

Read more about the IRS  Identity Protection PIN program.

If one of your customers  informs you that they have been a victim of identity theft and they  have not contacted the IRS you should do one of the following:

• See the IRS  Identity Theft website.This  site contains information such as what documents the IRS requires the  taxpayer to submit for the IRS to validate their claim, where to send  the information, and how the taxpayer can contact the IRS Identity  Protection unit; or
• Have the taxpayer  contact the IRS Identity Protection Unit at 1-800-908-4490. Their  hours of operation are Monday – Friday 8:00 am – 8:00 pm your  local time.

The Internal Revenue Service sent a infancy of claims for a adoption taxation credit to auditors this year given they lacked a compulsory documentation, even nonetheless it had options that could have enabled it to revoke a series of dear association audits and emanate refunds to relatives faster while still progressing a strong coercion strategy, according to a new report.

The report, expelled Monday by a Government Accountability Office, found that as of Aug 2011, 68 percent of a scarcely 100,000 earnings on that taxpayers claimed a adoption credit in a 2011 filing deteriorate were sent to a association review during a IRS. However, of a approximately 35,000 earnings on that audits have been finished as of August, a IRS usually assessed additional taxes approximately 17 percent of a time. The homogeneous rate for all association audits in 2010 was 86 percent.

“The time it has taken IRS to review these primarily legitimate adoption credit claims has resulted in substantial delays in a remuneration of a associated refunds,” pronounced a GAO.

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According to IRS officials, information for audits finished by Sep 2011 showed that an adoption credit association review takes an normal of 74 calendar days. The behind refunds, according to adoption group officials, can emanate problems for families awaiting to cover a costs of an adoption with a refund.

The sovereign adoption taxation credit was creatively dynamic in 1996 and after nice in 2010 to make a credit refundable so taxpayers could accept payments in additional of their taxation liability. The limit acceptable credit was also increasing to $13,170 of competent adoption losses for taxation year 2010.

As of Aug. 20, 2011, taxpayers had filed only underneath 100,000 returns, claiming about $1.2 billion in adoption credits. Following these changes, a IRS grown a plan for estimate adoption credit claims.

The IRS’s plan for ensuring taxpayer association with a adoption credit enclosed requiring taxpayers to contention explanation of a finished or in-progress adoption with their return. Because taxpayers claiming a credit for a special needs child (meaning that a state dynamic a child could not or should not be returned to a parent, and regulating specified criteria, a state could pretty assume that a child would not be adopted though state assistance) are authorised to explain a full credit though providing support of adoption expenses, they also indispensable to yield support certifying a special needs standing of a child. The IRS also compulsory that taxation earnings and ancillary support be filed on paper. Any earnings with blank or shabby support were automatically sent for association audits that a IRS conducts by mail.

By approach of communicating about a new requirements, a IRS reached out to taxpayers, taxation professionals and adoption organizations by several tools, including a Web site, Twitter accounts, and YouTube videos.

“A vast series of a adoption credit claims did not embody a compulsory documentation,” wrote IRS emissary commissioner for services and coercion Steven T. Miller in response to a report. “In response we released targeted communications to remind taxation preparers and taxpayers of a requirement. We also worked with taxation credentials program developers to urge a superintendence supposing by their products, and we leveraged a relations with vast taxation credentials firms to promulgate a support emanate to their preparers.”

However, a IRS did not make a specific bid to promulgate or promulgate information about a support mandate for special needs children to state adoption managers, who discharge state adoption programs, a GAO found. In addition, a IRS did not mention in training materials for a review examiners what support was compulsory to infer special needs status. The IRS after revised a training materials to contend that a state adoption assistance agreement between a state and adoptive relatives was sufficient proof, though did not yield samples of such agreements in a materials or place any on a Web site. As a result, taxpayers submitted a infancy of earnings with possibly no support or deficient documentation, heading to a audits.

The GAO endorsed several ways a IRS could equivocate a problems. One choice is would be for a IRS to immediately send a minute to taxpayers who contention earnings though any support requesting a paperwork before initiating an audit. This could potentially revoke a series of audits and behind refunds, though a IRS has not nonetheless dynamic a border of this impact, a GAO noted. IRS officials concurred that information from a 2011 filing deteriorate knowledge should concede them to establish either promulgation an initial minute requesting support would be some-more effective than initiating a association audit.

The GAO also endorsed that a IRS promulgate with state and internal adoption officials, yield examiners with examples of adoption assistance agreements, place a agreements on a Web site, and establish either promulgation a minute before initiating an review would revoke a need for audits.
The IRS generally concluded with 3 of a GAO’s recommendations, though had concerns that fixation representation agreements on a Web site competence capacitate fraud. However, given other explanation of adoption contingency accompany a taxation credit claim, a GAO pronounced it believes a advantages of creation these agreements accessible to adoptive relatives transcend a risks.

“We took stairs to minimize weight on taxpayers and to equivocate undue delays in arising refunds; however we also offset those goals with a shortcoming to strengthen open funds,” wrote Miller. “In a entrance weeks, we will inspect a doing plan for a 2010 taxation year to establish what improvements we can make for destiny years, and to favour service-wide best practices.”

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