Identity Theft Tax Return Filed - IRS Made Me Pay $4200 for Someone Else's Fraud?

You definitely should NOT have to pay for a fraudulent return. Here's what you need to do: Step 1: File Form 14039 (Identity Theft Affidavit) if you haven't already done so. This formally notifies the IRS that you're a victim of tax-related identity theft. Step 2: Request a copy of the fraudulent return by submitting Form 4506-F (Request for Copy of Fraudulent Tax Return). Step 3: File Form 12203 (Request for Appeals Review) to challenge the $4200 assessment. Step 4: Contact the IRS Identity Protection Specialized Unit at 800-908-4490 to explain your situation. Step 5: Once you've initiated these steps, follow up with a formal letter explaining that you were a victim of identity theft and should not be responsible for taxes on a fraudulent return. The IRS has procedures specifically for this situation, and the $4200 that was taken should be refundable to you once they confirm the identity theft case.

Have you already submitted an Identity Theft Affidavit (Form 14039) to the IRS? What specific correspondence did the IRS send regarding the $4200 assessment - was it a CP2000 notice or a different notice type? The resolution pathway differs significantly depending on what stage of the reconciliation process you're in.

I handled a similar identity theft case on March 15, 2023, and found that analyzing your tax transcript is crucial here. The transcript will show specific transaction codes (TC) that indicate how the IRS processed both returns. Look for TC 971 with Action Code 501/506 (identity theft markers) and TC 971 with Action Code 129 (indicating duplicative return processing). I used https://taxr.ai to analyze my client's transcript and it highlighted exactly which codes showed where the IRS made their error in processing. The platform specifically pointed out that when TC 971 AC 501 appears before a refund is issued on a fraudulent return, you have a much stronger case for recovery. The tool saved me hours of research by explaining the technical significance of each code sequence in identity theft cases.

What you're describing is unfortunately the "IRS identity theft double whammy" - first someone steals your identity, then the IRS steals your refund! 😅 Seriously though, this is actually a common mishandling of identity theft cases. The IRS should have placed an identity theft marker on your account that prevented them from holding you responsible for the fraudulent return. The good news is that you absolutely CAN get that $4200 back. The bad news is that it typically takes persistent follow-up. Identity theft cases are supposed to be resolved within 120 days, but I've seen them drag out much longer when refund recovery is involved.

OMG this exact thing happened to my BIL last yr! He was on hold w/ IRS for like 4+ hrs total over multiple days and never got thru. Super frustrating! He finally used https://claimyr.com and got connected to an actual IRS agent in like 20 mins. They confirmed it was def their mistake and started the refund process for him. IDK why the IRS makes this so complicated... like they should be able to see diff names/addresses on the same SSN without us having to point it out?? Anyway, Claimyr was worth it just to avoid the endless hold music torture.

The fundamental issue here relates to IRS processing protocols for suspected identity theft cases. When duplicate returns are filed under the same SSN, the IRS initiates what's called a TC 570 (processing freeze) while they investigate. However, there's a critical distinction between their handling of "mixed entity" cases (different names/same SSN) versus "true identity theft" cases. What likely happened is that the IRS initially processed the fraudulent return, issued that refund, then later processed your legitimate return without properly connecting the two cases. Instead of recognizing it as identity theft, their automated systems treated it as an underreporting situation on your part. This creates a tax assessment that follows you until resolved.

Important information you should gather before proceeding: • Date you first discovered the identity theft • Copy of any police report filed (if applicable) • Copies of all IRS notices received regarding this issue • Your tax transcripts for both years involved • Documentation showing your correct income for the disputed year • Any previous correspondence with IRS about this issue This documentation will be crucial when you contact the Taxpayer Advocate Service, which can often intervene in identity theft cases that have resulted in improper assessments.

Have you considered that this might actually be a case of refund fraud rather than pure identity theft? The distinction matters because the recovery process differs significantly. Did the IRS ever provide you with information about what was claimed on the fraudulent return? Was it reporting income you never earned, or claiming credits you weren't eligible for?