IDENTITY THEFT
Fraudulent Return
TAXPAYER’S NAME
Submitted by:
Student’s name, Student Attorney
Philip C. Cook Low-Income Taxpayer Clinic
P.O. Box 4037, Atlanta, GA 30302-4037
Ph. (404) 413-9230
Fax. (404) 413-9229
E-mail: taxclinic@gsulaw2.gsu.edu
TABLE OF CONTENTS
INTRODUCTION.............................................................................................................................................1
TAX HISTORY ................................................................................................................................................1
STATEMENT OF FACTS................................................................................................................................2
APPLICABLE LAW .........................................................................................................................................4
APPLICATION OF LAW TO THE FACTS ......................................................................................................5
CONCLUSION ................................................................................................................................................6
Exhibits
A. Power of Attorney Form 2848
B. Wage & Income Transcript for 2008
C. 2008 Filing Requirements
D. Fraudulent Form 1040 for 2008
E. Account Transcript for 2008
F. Notice of Deficiency
G. Authentic Form 1040 for 2008
H. Accurint Report
I. Brochure for Peachtree Apartments
J. IRS Identity Theft Affidavit Form 14039
K. Police report and FTC Identity Theft Affidavit
L. Verification of Identity
 Driver’s License from Georgia
 Social Security Card
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INTRODUCTION
Include in this section:
 Relief requested
 Tax year request applies to
You may have a case where the taxpayer receives a Statutory Notice of Deficiency and
then this would be an Appeals Notebook (as in this example). You could also have a
case where the taxpayer received a Collection Due Process Notice. You would then
prepare a memo to Collections and challenge the collection of the tax. You may also
have a case where you will submit a notebook to the Taxpayer Advocate.
TAXPAYER’S NAME is 23 years old, has a GED after he failed to complete high
school, is frequently unemployed, and lives with his elderly great-aunt. He became a
victim of identity theft when an unknown person filed a fraudulent tax return for tax year
2008 using his name and social security number (see Exhibit XX which is a copy of the
fraudulent return). Mr. TAXPAYER respectfully requests abatement of the $2,347 tax
liability and $1,000 Failure to File penalty which are associated with Form 1040 for tax
year 2008.
TAX HISTORY
Include the following information in this section:
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Filing history of the year or years at issue
Brief discussion of issues that gave rise to the liability. You should address
whether the IRS issued a refund based on the fraudulent return
Discussion of the issuance of the notice or IRS correspondence that
triggered this memo and who in the IRS issued it (Examination, Appeals,
Collections) and include a copy
Discussion of whether the client or the Clinic filed something to give rise to
this memo, e.g. who filed or entered an appearance in Tax Court, the date
of Counsel’s Answer, etc… and whether the Clinic entered an entry of
appearance and the date of Counsel’s Answer.
Discussion of where current jurisdiction lies (Appeals, Counsel or
Collections or Taxpayer Advocate) and what transpired at lower level of
IRS.
Make reference to the corrected tax return included in the notebook
Mr. TAXPAYER did not file an income tax return for 2008 because his income of
$6,175 was less than the 2008 filing requirement of $8,950 for a single taxpayer under
the age of 65 (see Exhibit XX which is the 2008 Wage & Income Transcript; see also
Exhibit XX which is the 2008 Filing Requirement reported in Publication 17 for 2008).
On November 16, 2009, an unknown person filed a fraudulent return for tax year
2008 using Mr. TAXPAYER’s name and social security number. The return claimed
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$15,977 in self-employment income and a refund of $8,001 to be deposited into a bank
account. The refund was issued by the IRS (see Exhibit XX which is the Account
Transcript for tax year 2008).
On March 21, 2011, Mr. TAXPAYER received a Notice of Deficiency that
indicated that he had a tax deficiency of $2,347 for tax year 2008 due to the addition of
$6,175 in reported W-2 income (see Exhibit XX which is the Notice of Deficiency).
Additional changes included the removal of $9,861 in unreported 1099 withholdings
claimed on the return, and a $1,000 Failure to File penalty.
Mr. TAXPAYER filed a petition with the U.S. Tax Court on June 13, 2011. The
IRS Office of Chief Counsel in Atlanta filed an answer on August 11, 2011, and the case
was referred to the Appeals Office at the Brookhaven Appeals Campus. Mr.
TAXPAYER sought the assistance of the Philip C. Cook Low-Income Taxpayer Clinic
(see Exhibit xx which is the Form 2848 Power of Attorney), and on September 19, 2011
the Clinic requested a face-to-face conference with an Appeals Officer in Atlanta.
To present an accurate income tax return based on his actual income, Mr.
TAXPAYER has prepared and signed a Form 1040 for tax year 2008 (see Exhibit xx).
STATEMENT OF FACTS
Include the following information in this section:
 Complete discussion of taxpayer and their living and employment situation
in the year(s) the liability arose and currently. If relevant, also include the
taxpayer’s age, health, education, employment, living arrangements (rent
or own), family members living with taxpayer or in area, and any facts that
may be important with respect to the relief that is being requested.
 A detailed discussion as to why the client did not earn the income the IRS
contends he or she did.
 Make reference to the IRS’s Identity Theft Affidavit (Form 14039)
 Have supporting documents and, whenever one exits and it is referred to,
be sure that it is described, e.g. “Attached as Exhibit X is a copy of the
lease that the taxpayer entered into showing that the taxpayer lived at the
premises during the period of ____ to ____.”
In 2002, when he was fourteen years old, Mr. TAXPAYER moved into the house
of Ms. YYY, his great-aunt and legal guardian, at 123 Oak Trail in Atlanta, GA. He lived
at this address for all of 2008, and he lives there today. Since 2002, Mr. TAXPAYER
has lived at only one other address, 123 Rose Lane in Tinyville, GA, an apartment he
shared with his girlfriend during March and April of 2010. These two residences appear
in the list of verified addresses from an Accurint report for Mr. TAXPAYER (see Exhibit
XX).
Mr. TAXPAYER was twenty years-old in 2008 (see Exhibit XX which is a Driver’s
License giving his date of birth).
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Discuss the address provided in the fraudulent return.
 Check Google Maps to see if the address is a residence, commercial
business (such as a store that rents mailboxes), or even an empty lot
(especially if the refund is a direct deposit).
 Is there anything to link the client with the address (e.g., previously lived
there, a family member lives there, etc.)?
The 2008 Form 1040 lists the taxpayer’s home address as 123 Peachtree Circle
in Suburbville, GA (see Exhibit XX). This address is part of the Peachtree Apartments
complex (see Exhibit XX which is a brochure for Peachtree Apartments and shows a
map with Peachtree Circle as part of the apartment complex). Mr. TAXPAYER has
never lived at this address, and does not know any person who does. An Accurint report
for Mr. TAXPAYER does not list 123 Peachtree Circle as a known address and reflects
that Mr. TAXPAYER has lived only at 123 Oak Trail and 123 Rose Lane, described
above (see Exhibit XX which is the Accurint report).
It is important to clearly indicate which income, if any, is attributable to the client.
Contrast this with any fraudulent income.
 If applicable, include a discussion of reasons why the client was unable to
earn any fraudulent income (e.g., the client is disabled but the income is
from physical labor, the fraudulent income is from a job in a different state
(you will need to provide evidence that the client was not and could not
have been at the other worksite).
 Use Wage & Income transcripts from prior and subsequent years to show
that the client has no history of income from the fraudulent sources,
locations, or industries.
 Many times, the fraudulent income is from generic self-employment that
was never reported on a 1099 filed with the IRS. In these cases, simply
state that the income is not attributable to the client.
The 2008 Form 1040 reports $15,977 in self-employment income and the
occupation “Construction” (see Exhibit XX). During 2008, Mr. TAXPAYER worked at the
fast-food restaurant Burgerz for Food Conglomerate Corp. and for the temporary
staffing service Adams Stocking Service. Wages were reported on a Form W-2 for Mr.
TAXPAYER from those same two companies, both of which were actual employers of
Mr. TAXPAYER. The Wage & Income Transcript does not show a Form W-2 filing for
$15,977 as claimed on the 2008 Form 1040 (see Exhibit XX which is the 2008 Wage &
Income Transcript; see also Exhibit XX which is the 2008 Form 1040). The wages
reported in 2008 are summarized below in Table 1.
Table 1: Summary of Wages Reported in Tax Year 2008 for Mr. TAXPAYER
Employer
Food Conglomerate Corp.
(“Burgerz”)
Adams Stocking Service
EIN
Location
Wages Reported
123456789
Atlanta, GA
$6,057.00
987654321
San Diego, CA
$118.00
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Exhibit XX (2008 Wage & Income Transcript).
Fraudulent returns often contain inflated earnings or withholdings to qualify for a
larger refund. Point out any unrealistic information that may indicate fraud.
The Fraudulent 2008 Form 1040 reports withholdings of $9,861 on $15,977 of
income (see Exhibit XX). It is unrealistic that a low-income wage earner would have
over 60% of their earnings withheld. An inflated claim of withholdings could be indicative
of a fraudulent tax return.
To Mr. TAXPAYER’s knowledge, the 2008 tax return is the only instance of
identity theft, and he does not know who committed the act. He has completed an IRS
Identity Theft Affidavit Form 14039 (see Exhibit xx), filed a police report with his local
police department, and completed the FTC identity theft affidavit (see Exhibit xx which is
a copy of the police report and FTC affidavit).
In the IRS Identity Theft Affidavit (Form 14039), Mr. TAXPAYER has sworn under
penalty of perjury that he neither earned the income reported in the fraudulent 2008 tax
return nor received any of the refund associated with return.
APPLICABLE LAW
Under this section don’t put facts, only law. The section should begin with
statutory references, then cases, then regulations, then other authority.
The Internal Revenue Code defines gross income as “all income from whatever
source derived, including (but not limited to) the following items: (1) Compensation for
services, including fees, commissions, fringe benefits and similar items. . . .” I.R.C. § 61.
In fact, a taxpayer only owes tax on the income derived by that taxpayer. Thus, “if the
taxpayer presents evidence that he/she does not owe the tax due to [identity] theft,” the
taxpayer is entitled to full or partial abatement of tax liability incurred as a result of that
identity theft. The IRS must give the account special handling. I.R.M. section 5.1.12.2
(09-20-2012); see also I.R.M. section 21.9.2.1 (10-01-2012).
In general, the IRS’s determination of the existence of a tax liability is presumed
to be correct, and the burden is on the taxpayer to prove otherwise. Tax Court Rule 142;
Welch v. Helvering, 290 U.S. 111, 11 (1933). However, the burden may shift where a
taxpayer produces credible evidence with respect to any factual issue relevant to
ascertaining his income tax liability. I.R.C. Section 7491 (a)(1); see also 35.4.1.6.1 (0811-2004)
In Martin v. Commissioner of Internal Revenue, T.C. Summ.Op 2009-121, 2009
WL 2381577 (U.S. Tax Ct. 2009), a taxpayer disputed the fair market value of a
repossessed vehicle as listed on the lender’s Form 1099-C. The taxpayer testified in
court that the value was incorrect because the fair market value of the vehicle was
higher at the time of repossession, which was three years before the issuance of the
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Form 1099-C. The burden to prove the sufficiency of the 1099-C then shifted to the IRS.
Because the IRS was unable to provide evidence to disprove the taxpayer’s testimony,
the court ruled in favor of the taxpayer concerning the value of the vehicle.
I.R.C. section 6065 specifies that “…any return … shall contain or be verified by a
written declaration that it is made under the penalties of perjury.” This requirement has
been affirmed by the U.S. Supreme Court as part of the four-part “substantial
compliance” test for determining if a return is valid. Beard v. Commissioner, 82 T.C.
766, 777 (1984), aff'd per curiam, 793 F.2d 139 (6th Cir. 1986). A return that has been
filed because of identity theft is not valid because the return lacks the taxpayer’s
consent and signature.
I.R.C. section 6404(a)(3) provides the Secretary with the authority to abate any tax
liability that has been erroneously assessed. Treasury Regulation section 301.6404–
1(a) provides, “The district director or the director of the regional service center may
abate any assessment … if the assessment has been erroneously or illegally made.”
Further, the Internal Revenue Manual states, “According to the Code and Regulations,
the Service has the authority to abate tax.” 5.1.15.1 (10-09-2012).
APPLICATION OF LAW TO THE FACTS
New facts should not be mentioned. All facts must be set forth in the facts
section.
The IRS has proposed a tax deficiency based on a fraudulent Form 1040 filed
with Mr. TAXPAYER’s name and social security number for tax year 2008. Because he
was unaware of the return, Mr. TAXPAYER was unable to verify the contents of the
return. This means the fraudulent return is invalid since it lacked Mr. TAXPAYER’s
consent and signature. Because the proposed changes in the Notice of Deficiency are
based on income reported on return that is not attributable to Mr. TAXPAYER, he
should not be held responsible for paying the $2,347 in taxes.
Mr. TAXPAYER did not receive the refund issued by the IRS based on the
fraudulent return. The refund was directed to an address where Mr. TAXPAYER has
never lived. Because he was unaware of the refund and did not receive it, Mr.
TAXPAYER should not be held liable for the amount issued as a refund.
The Failure to File penalty is based on the late filing and the $15,977 of fictitious
income reported on the fraudulent return. According to Mr. TAXPAYER and his Wage &
Income transcript for 2008, his only income came from the two companies which filed
W-2s with a total of $6,175 in income. This amount was less than the filing requirement
for Mr. TAXPAYER in 2008, so he had no filing requirement for that year.
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CONCLUSION
Mr. TAXPAYER respectfully requests that he be relieved of the responsibility for
paying tax, penalties, and interest resulting from income fraudulently reported using his
name and social security number during tax year 2008 as described above. The 2008
Form 1040 was fraud committed by an unknown person. Because the proposed
changes in the Notice of Deficiency are based on income not attributable to Mr.
TAXPAYER, he should not be held responsible for paying the $2,347 in taxes. In
addition, the $1,000 Failure to File penalty should be removed because Mr.
TAXPAYER’s actual income did not meet the filing requirement for tax year 2008.
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