Employee or Independent Contractor

Posted by Bruce Mc on Jun 10, 2011 in Employee, Independent contractor, Information | 0 comments

If you hire someone for a long-term, full-time project or a series of projects that are likely to last for an extended period, you must pay special attention to the difference between independent contractors and employees.

Why It Matters

The Internal Revenue Service and state regulators scrutinize the distinction between employees and independent contractors because many business owners try to categorize as many of their workers as possible as independent contractors rather than as employees. They do this because independent contractors are not covered by unemployment and workers’ compensation, or by federal and state wage, hour, anti-discrimination, and labor laws. In addition, businesses do not have to pay federal payroll taxes on amounts paid to independent contractors.

Caution: If you incorrectly classify an employee as an independent contractor, you can be held liable for employment taxes for that worker, plus a penalty.

The Difference Between Employees and Independent Contractors

Independent Contractors are individuals who contract with a business to perform a specific project or set of projects. You, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.

Example: Sam Smith, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. He is to receive $1,280 every 2 weeks for the next 10 weeks. This is not considered payment by the hour. Even if he works more or less than 400 hours to complete the work, Sam will receive $6,400. He also performs additional electrical installations under contracts with other companies that he obtained through advertisements. Sam Smith is an independent contractor.

Employees provide work in an ongoing, structured basis. In general, anyone who performs services for you is your employee if you can control what will be done and how it will be done. A worker is still considered an employee even when you give them freedom of action. What matters is that you have the right to control the details of how the services are performed.

Example: Sally Jones is a salesperson employed on a full-time basis by Rob Robinson, an auto dealer. She works 6 days a week, and is on duty in Rob’s showroom on certain assigned days and times. She appraises trade-ins, but her appraisals are subject to the sales manager’s approval. Lists of prospective customers belong to the dealer. She has to develop leads and report results to the sales manager. Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. She is paid a commission and is eligible for prizes and bonuses offered by Rob. Rob also pays the cost of health insurance and group term life insurance for Sally. Sally Jones is an employee of Rob Robinson.

Independent Contractor Qualification Checklist

The IRS, workers’ compensation boards, unemployment compensation boards, federal agencies, and even courts all have slightly different definitions of what an independent contractor is, though their means of categorizing workers as independent contractors are similar.

One of the most prevalent approaches used to categorize a worker as either an employee or independent contractor is the analysis created by the IRS. The IRS considers the following:

1. What instructions the employer gives the worker about when, where, and how to work. The more specific the instructions and the more control exercised, the more likely the worker will be considered an employee.
2. What training the employer gives the worker. Independent contractors generally do not receive training from an employer.
3. The extent to which the worker has business expenses that are not reimbursed. Independent contractors are more likely to have unreimbursed expenses.
4. The extent of the worker’s investment in the worker’s own business. Independent contractors typically invest their own money in equipment or facilities.
5. The extent to which the worker makes services available to other employers. Independent contractors are more likely to make their services available to other employers.
6. How the business pays the worker. An employee is generally paid by the hour, week, or month. An independent contractor is usually paid by the job.
7. The extent to which the worker can make a profit or incur a loss. An independent contractor can make a profit or loss, but an employee does not.
8. Whether there are written contracts describing the relationship the parties intended to create. Independent contractors generally sign written contracts stating that they are independent contractors and setting forth the terms of their employment.
9. Whether the business provides the worker with employee benefits, such as insurance, a pension plan, vacation pay, or sick pay. Independent contractors generally do not get benefits.
10. The terms of the working relationship. An employee generally is employed at will (meaning the relationship can be terminated by either party at any time). An independent contractor is usually hired for a set period.
11. Whether the worker’s services are a key aspect of the company’s regular business. If the services are necessary for regular business activity, it is more likely that the employer has the right to direct and control the worker’s activities. The more control an employer exerts over a worker, the more likely it is that the worker will be considered an employee.

Minimize the Risk of Misclassification

If you misclassify an employee as an independent contractor, you may end up before a state taxing authority or the IRS.

Sometimes the issue comes up when a terminated worker files for unemployment benefits and it’s unclear whether the worker was an independent contractor or employee. The filing can trigger state or federal investigations that can cost many thousands of dollars to defend, even if you successfully fight the challenge.

There are ways to reduce the risk of an investigation or challenge by a state or federal authority. At a minimum, you should:

• Familiarize yourself with the rules. Ignorance of the rules is not a legitimate defense. Knowledge of the rules will allow you to structure and carefully manage your relationships with your workers to minimize risk.
• Document relationships with your workers and vendors. Although it won’t always save you, it helps to have a written contract stating the terms of employment.

If you have any questions about how to classify your employees, please give us a call. We can help guide you in the right direction in the eyes of the IRS.

Those Affected by Late Tax Breaks

Posted by Bruce Mc on Jan 7, 2011 in Information, News Flash | 0 comments

The start of the 2011 filing season will begin in January for the majority of taxpayers. However, the last and late changes in the law mean that the IRS will need to reprogram its processing systems for three provisions that were extended in the Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010 that became law on Dec. 17. 2010.

People claiming any of these three items – involving the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction as well as those taxpayers who itemize deductions on Form 1040 Schedule A — will need to wait to file their tax returns until tax processing systems are ready, which the IRS estimates will be in mid- to late February.

“The majority of taxpayers will be able to fill out their tax returns and file them as they normally do,” said IRS Commissioner Doug Shulman. “We will do everything we can to minimize the impact of recent tax law changes on other taxpayers. The IRS has worked through the holidays and into the New Year to get our systems reprogrammed and ensure taxpayers have a smooth tax season.”

The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the late tax law changes. In the interim, people in the affected categories can start working on their tax returns, but they should not submit their returns until IRS systems are ready to process the new tax law changes.

The IRS urged taxpayers to use e-file instead of paper tax forms to minimize confusion over the recent tax changes and ensure accurate tax returns.

Taxpayers will need to wait to file if they are within any of the following three categories:

• Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes (add link to Schedule A).  In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Re-authorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

• Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students – covering up to $4,000 of tuition and fees paid to a post-secondary institution – is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.
• Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.

For those falling into any of above three categories, the delay affects both paper filers and electronic filers.

The IRS emphasized that e-file is the fastest, best way for those affected by the delay to get their refunds. Those who use tax-preparation software can easily download updates from their software provider. The IRS Free File program also will be updated.

As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure a smooth tax season.

Updated information will be posted on IRS.gov. This will include an updated copy of Schedule A as well as updated state and local sales tax tables. Several other forms used by relatively few taxpayers are also affected by the recent changes, and more details are available on IRS.gov.

In addition, the IRS reminds employers about the new withholding tables released Friday for 2011. Employers should implement the 2011 withholding tables as soon as possible, but not later than Jan. 31, 2011. The IRS also reminds employers that Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on IRS.gov before year’s end.

Check Your Withholdings

Posted by Bruce Mc on Nov 30, 2010 in Exemptions, Filling Status | 0 comments

With less than two months remaining in the calendar year, it’s a great time to double check your federal withholding to make sure enough taxes are being taken out of your pay.

The average refund for 2009 was $2,887, up 8 percent from 2008. Even though the Making Work Pay Tax Credit lowered tax withholding rates in 2009 and 2010 for millions of American households, some workers and retirees still need to take steps to be sure enough tax is being taken out of their checks.

Certain folks should pay particular attention to their withholding. These include:

• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Some Social Security recipients who work
• Workers who do not have valid Social Security numbers
• Retirees who receive pension payments

As was the case in 2009, taxpayers who wind up owing tax because too little was taken out of their paychecks during 2010 may qualify for special relief on a penalty that sometimes applies. Depending on their personal situation, some people could have less withheld from their paychecks than they need or want.

Failure to adjust withholding could result in potentially smaller refunds or, in limited instances, a taxpayer may owe tax rather than receive a refund next year.

An easy way to check how much you’ll owe this year is to use the 1040 Tax Calculator on our website. Or just give us a call and we’ll figure it out with you.

IRS tax debt problems, Simple solutions

Posted by Bruce Mc on Nov 20, 2010 in Information | 0 comments

The following is a guest post from Amy Lewis

Tackling the Internal Revenue Service is not an easy task, especially when you owe hefty tax debts to them. However, that definitely does not mean that you cannot do anything to resolve your tax issues. In fact, there are several solutions to tax debt problems that you can resort to. Here are some of the common ones available for your tax debt help :

Offer-in-Compromise:

It is a settlement offer that you make to the IRS, when you cannot pay your taxes in full. You offer to pay as much as you can afford. On reviewing your financial condition, the IRS decides whether to accept or decline your offer. This program not only saves you interests and penalties but also gives you a fresh chance to clear your debts.

Installment Agreements:

These are payment plans offered by the IRS to taxpayers, who are unable to pay their taxes in a single payment. Installment plans are broadly of 4 types and suited to the taxpayers’ requirements. There are several factors, such as your tax amount, your present income and future ability to pay, which determine if installment agreement or IRS payment plan is the best solution to your tax issues. Installment agreements can be a good alternative if you cannot arrange an offer-in-compromise. Also theses plans can be negotiated with the IRS.

Get a Penalty Removal:

By an automated process performed by a computer, penalties are added to tax debts that you owe to the IRS. Often these penalties are found to be completely inaccurate. If you think penalties have been imposed on your taxes wrongly, then you can contest it by requesting the IRS that they waive off the penalties. However, it is advised that instead of contesting on your own, you consult a tax specialist who can help you fight and eliminate the penalties. In fact, penalty elimination can reduce your payable tax amount substantially and make it much easier for you to pay it off.

Place taxes under “Currently not collectible” status:

If you are being unable to make payments towards your tax obligations due to hardships such as financial troubles, temporary illness, layoff or any other acute reason, then you can request the IRS that they put your debts under Currently Not Collectible or “hardship” status. Though it is a temporary solution, it can relive you of your present hardship. Tax debts are complex issues and not quite easy to handle. So, if you are going through a tough time with your taxes, you should talk to a reputable tax expert and seek for the right tax debt solution right away.

A Week in Perspective

Posted by Bruce Mc on Nov 14, 2010 in Information, Week in review | 0 comments

The Turbo Tax defense doesn’t work in Tax Court. No Gold at the End of the Rainbow – The Court also noted that they gave plenty of opportunities for the Aus to negotiate a settlement with the IRS, and/or to consult attorneys regarding their case. They didn’t until the Court was about to render its decision. Had they asked a tax professional or an attorney familiar with tax law about their case, they likely would have been advised to settle and they would be paying less than they’ll have to.

Disability Insurance Policy To Protect Your Most Important Asset – Your Income – Ask yourself this question. What is your most important and valuable asset? Think about it for a minute. Is it your house? Your savings or your 401(k) retirement plan? Your sports car or rare memorabilia? While all of these things are both important and valuable, none of them truly represent your MOST valuable asset

Don’t Get Taken! What Passive Income Really Means

Love And Money – Love and money don’t always go hand in hand. It can be the cause of countless arguments especially since most of us have different money styles. However, with a few guidelines to promote better money communication, money can become a source of joy within a relationship rather than a stress inducer.

I like this – My “Reverse” Black Friday

ANOTHER ONLINE DEBATE – It seems the announcement of THE SCHEDULE C LETTER has re-opened the online debate of “Should a Sole Proprietor Incorporate, or A One-Person LLC Elect To Be Taxed As A Corporation, For No Other Reason Than to Reduce the Chance of an IRS Audit?” –

            The Answer is individually situational. Please see a lawyer then see you tax professional before making your choice.

Not Going To Happen – All over the tax blogs today has been coverage of the President’s Debt Reform Panel’s Tax Reform Panel options for cleaning up the American Tax Code. It looks well thought out and I intend to give it much more study over the next couple of days. But it doesn’t matter what the options suggest, it won’t happen.

Veterans Day 2010: Tax considerations for members of the military

Home Improvements That Qualify for Tax Deductions – Did you know that some home improvements may qualify for federal tax deductions or tax credits?  Knowing which renovations and improvements are eligible for tax deductions can help you decide whether or not to make the improvements, and can help you correctly claim deductions or credits for these renovations when you file your taxes.

The One Thing to Drop from Your Budget Like a Hot Potato

Financial Loopholes to Take Advantage of Now – In 2001 Congress passed a massive tax reform bill called the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), which provided tax cuts to all Americans, in all income levels, via a multitude of changes to the tax code. These tax benefits have come to be known as the Bush tax cuts.

Tax Relief FAQ: How Does the IRS Compute Penalties For Delinquent Tax Returns? – An important step in avoiding IRS tax trouble is to understand how the IRS approaches delinquent tax return penalties.

1099s – The Good, the Bad and the Ugly  - Having a small business issue 1099s for these purchases starting in 2012 would be pointless:

• $852 of office supplies purchased from Staples
• $2,592 of airline tickets purchased directly from the airlines
• $1,300 of services from their CPA firm

Issuing a 1099 for $700 of services rendered by a web designer makes sense though and existing law already covers that.

Steve Jobs Is NOT Giving You Tax Advice (But If He Did…) – . . . , as marketing goes, it’s pretty darn clever. And despite whether you love Apple or not, you have to give them credit for consistently being above the curve on the marketing side. As a tax geek, I’m a little bit in love. Using the Tax Code as a marketing tactic is genius (so, hey Apple, call me).

How to Work a Job Fair – Before You Go to a Job Fair, It’s best to be prepared for a job or career fair. Before you go, prepare yourself to impress, and have an idea of what companies you want to talk to. As get ready to go, consider taking these actions:

So I Won a Free Trip to the Bahamas. Now, How do I Report It on my Tax Return?  - “I will not be sent a Form 1099-MISC. So how should I account for this on my tax return?”

What are the odds of an Obama compromise on Bush rates? – Tax planners got all excited yesterday when top White House aide David Axelrod hinted to the Huffington Post website that the President might be ready to extend the 2010 tax rates for top earners. Absent new legislation, the top marginal rate will rise from 35% to 39.6% in 2011 — and higher when phase-outs are counted. But if the Axelrod statements are a trial balloon, the President isn’t ready to climb aboard just yet. CNN reports on comments he made in Seoul:

Lottery winnings, charitable donations and the tax collector – By now I’m sure you’ve heard about the Nova Scotia couple who hit the lottery and then gave away most of their $10.9 million (Canadian) winnings to charities.

Allen and Violet Large are generous, but they’re no fools. They kept nearly a million for themselves. The septuagenarians say they’ll use the money for emergencies and to buy more lottery tickets.

Good for them! And doubly good for them that Canadian tax law allows them to give away so much of their windfall.

Wash Sale Rule for Investment Losses – All investors experience losses, no matter how experienced or knowledgeable they are.  The Internal Revenue Service (IRS) allows investors to deduct capital losses from investing gains in order to reduce your capital gains taxes.  Under the IRS rules, short-term capital losses can be used to reduce short-term capital gains, which is extremely beneficial because short-term capital gains tax is equal to your ordinary income tax rate.

Roth Conversion Planning Ideas

5 Ways to Make Sure that a Partnership is a Good Idea for Your Business – Ask most business people their most horrendous business story, and it will almost always involve a partner.

Lucky Number 13: 13 Financial Changes for My 23rd Birthday –  now that I’m one day away from being 23, I’ve realized it’s time to start being more financially responsible.

A Week in Perspective

Posted by Bruce Mc on Nov 7, 2010 in Information, Week in review | 0 comments

EXPLAINING THE “METHODS” OF MY “MADNESS” – A look into the world of my blogging friend. (RDF- Looking forward to meeting up with you in St. Louis on August 15 – 18, 2011)

November’s Important IRS Dates – A new month is upon us, along with a new set of IRS Deadlines. We’re entering the IRS’s fourth and final quarter. Here’s the important IRS dates you need to know:

IRS Makes Few Changes to Retirement Rules – For the second year in a row, the Internal Revenue Service has announced that there will be no change to the maximum allowable contributions to pension plans or to individual retirement accounts in 2011. Here are the limits that will remain the same in 2011:

Expensing of Business Assets – New Treasury Report – Economic stimulus provisions of the past few years have included bonus depreciation and higher expensing amounts under IRC Section 179.

What Non-profits should know about Tax Form 990 – Form 990 or Return of Organization Exempt from Income Tax form is due to be submitted to the IRS by non-profits. Ever since 2008, this Form has been substantially revised to include several reporting requirements by the IRS. There are a few pertinent changes to the form and its requirements that non-profit organizations should know.

My favorite post this week.

A must read.

Being an Entrepreneur / Your Business – The topic of working on your own, or, even if you don’t the importance of the entrepreneur “in you” wherever you do work. Do you consult, do you have your own clients or are you striving to? There are some principals I think are necessary to make it “on your own” or excel where you are working. While I am a younger CPA and take a lot of pride in what I have accomplished so far, I keep working hard knowing that I have hardly touched the tip of the iceberg of what I can accomplish in my life.

Like my bloging mentor said about The Missouri Taxguy, Do I really need to keep reminding you to check out BlogRoll Beans from Joe Arsenault over at CafeTax? Thanks Joe.

Suggested first Republican budget cut: Congressional salaries – Watch out for the pigs as they pass over Kay.

What if you are donating it to an arson awareness organization?

Another must read –

Commercials, Kids, and Materialism – If you’ve been reading The Simple Dollar for long, you’ll know that this ad takes a swing directly at a lot of different ideas I’ve shared over the years about parenting, money, materialism, and other things. I thought I’d run through them again in light of this ad.

Tax moves to make in November – we have to get through the lame-duck session. In the next few weeks, Congress has vowed to deal with the expiring expiring Bush tax cuts, stimulus tax breaks that are only good for a couple more months, the already ended extenders and even the estate tax that’s scheduled to come back to life on Jan 1. 2011.

Tax Carnival #76: Election Day 2010

Pension Plan Limits for 2011 – The IRS has announced the 2011 cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items.

3 Tips for Launching a New Business – Starting a business may not be one of the easiest things to do, but it could be one of the most rewarding, as well as one of the most financially freeing decisions you could make for yourself. Seeing that most, if not all of us, need some hand-holding whenever we’re starting a new venture, here is some advice on three routine yet absolutely crucial areas of a business.

How to Fund a Startup – Deciding to start a business is exciting.  You are in charge of making decisions large and small, and you have the opportunity to change your life, and possibly other lives as well. But starting a business also brings challenges. Almost all businesses will require some form of capital to start.  If you don’t have cash reserves in a savings account or other liquid investment available to use, you’ll have to find other ways to fund your startup.  Here are some common methods for getting the money you need to start your business:

Did Obama Really Cut Small-Business Taxes 16 Times? – The assertion that the Obama administration has cut taxes for small business 16 times might surprise some entrepreneurs —But the White House backed the claim with a fact sheet. Here, for the record, are the taxes the administration says it has cut, in its words:

Bill Gates Loses on Election Night

Could Tax Law Professors Be More “Tax Return Hands-On” Than Tax Practitioners? – Mike Foster, who practices with Venable LLP, said, “I don’t even do my tax returns anymore. I don’t know any tax lawyer who does their own tax returns. The forms are Greek even to us.” Hopefully someone does a survey to determine how many tax lawyers do their own returns.

Please Ask Me Before… – …you make decisions that might affect your taxes. . . .

In short, please see me (or your tax professional) before you do something that will affect your taxes. If you’re not sure if there will be an effect, please call and ask.

5 ways to save on heating costs – We are always on the lookout for ways to save a few extra dollars and heating costs are a good place to start, especially in the fall and winter.

FAIR Tax isn’t just a bad tactic; it’s a bad idea. – The Wall Street Journal and the Cato Institute’s Daniel Mitchell have branded the “FAIR Tax” sales tax proposal a loser issue for political candidates. In a more-in-sorrow-than-anger tone, the Journal notes the difficulties of candidates who embrace this national sales tax:

5 Do-It-Yourself Services You Should Leave to the Professionals – Many people are tightening their belts in these uncertain economic times.One of the first places we often look to save money is finding projects around the home that we can do ourselves rather than calling the professionals. All do-it yourself projects are not created equal, though, and there are times when you are better off calling in the professionals rather than potentially causing more problems by doing it on your own.

What is QE2, and What Does it Mean for You? – The big news on the economic front is that the Federal Reserve has decided to launch a second round of “quantitative easing” – dubbed QE2. If you’re not familiar with the concept of quantitative easing

Don’t pay the seller’s income tax – The Foreign Investment in Real Property Tax Act of 1980 requires buyers to withhold 10 percent federal income tax when buying real estate from those diabolical foreign sellers. The IRS can force a buyer who fails to withhold the 10 percent from the purchase payment to come up with the 10 percent withholding out of his own assets.

Saving Money at Christmas – Christmas spending over the last 2 or 3 years has been relatively low in comparison with other years, but that’s all set to change this Christmas. According to the National Retail Federation (NRF), shoppers are ready to part with their cash this holiday season for the first time since the recession hit.  The NRF has forecast total retail sales growth of 2.3% for November and December this year, which means that consumers plan to spend an average of $688.87 on holiday shopping this year, an incredible figure. So if that’s the sort of money the average person on the street is willing to spend this Christmas, how many of you are actually trying to save?

Jason Blumer CPA, He’s a Funny Guy

Carnival of Wealth #10 – Halloween Edition

Website 101: How to Build a Site and Get It Online – Building and putting a website online doesn’t have to be difficult or complicated, though. If you are willing to do a little mental gymnastics and learn a few tricks, you can build a simple website on your own and publish it to your server yourself. Here are a few simple tips for do-it-yourselfers.

How Much Will You Spend in Retirement? – When people share their retirement plans with me, they often assume that they’ll be able to reduce their spending once they retire. At first glance, this seems reasonable. After all (they tell themselves) they won’t have to support the kids anymore and the house will be paid for. And the media encourages people to think this way too. They make the argument that once folks retire, they usually spend 80% of what they spend while they are working. This kind of thinking is wrong and dangerous… Unless you are very mindful and really understand how much money you will need to retire.

Five Ways to Save Money on Food – The number one way to save money is by learning how to cook. You might have a hectic schedule and be exhausted at the end of the day but push yourself to prepare a nice meal. You’ll get to enjoy it, expand your knowledge about cooking, and eat better than ordering it from some fast food place. You won’t be good at it in the beginning but over time your skills will improve and you’ll enjoy it even more.

Things You Should Know About Identity Theft

Posted by Bruce Mc on Sep 30, 2010 in Information, Opinions | 0 comments

As a victom of this crime I have learned much more than if not. Sadly the criminal in my situation was a friend, a singal father, a co-worker, and weighed down with a drug problem.

Criminals use many methods to steal personal information from taxpayers. They can use your information to steal your identity and file a tax return in order to receive a refund. Here are things the IRS wants you to know about identity theft so you can avoid becoming the victim of a scam artist.

1. Identity thieves get your personal information by many different means, including stealing a wallet or purse or accessing information you provide to an unsecured Internet site. They even look for personal information in your trash. They also pose as someone who needs information through a phone call or e-mail.
2. The IRS does not initiate contact with a taxpayer by e-mail.
3. If you receive an e-mail scam, forward it to the IRS at phishing@irs.gov.
4. If you receive a letter from the IRS leading you to believe your identity has been stolen, respond immediately to the name, address, or phone number on the IRS notice.
5. Your identity may be stolen if a letter from the IRS indicates more than one tax return was filed for you or the letter states you received wages from an employer you don’t know.
6. If your Social Security number is stolen, it may be used by another individual to get a job. That person’s employer would report income earned to the IRS using your Social Security number, making it appear that you did not report all of your income on your tax return.
7. If your tax records are not currently affected by identity theft, but you believe you may be at risk due to a lost wallet, questionable credit card activity, or changes to your credit report, you need to provide the IRS with proof of your identity. You should submit a copy of your valid government-issued identification – such as a Social Security card, driver’s license, or passport – along with a copy of a police report and/or a completed Form 14039, IRS Identity Theft Affidavit.
8. Show your Social Security card to your employer when you start a job or to your financial institution for tax-reporting purposes. Do not routinely carry your card or other documents that display your SSN.
9. If you have previously been in contact with the IRS and have not achieved a resolution, please contact the IRS Identity Protection Specialized Unit, 1-800-908-4490.

For more information about identity theft – including information about how to report identity theft, phishing, and related fraudulent activity – visit the IRS Identity Theft Resource Page, which you can find by typing “identity theft” in the search box on the IRS.gov home page.