Stolen Identity Tax Refund Fraud

Last June a buyer client called me in a total panic…

“Doug, Bank of America just called demanding written copies of our tax returns from the IRS!”

“Okay, did they say why?” I asked.

“No, and I have been on hold with the IRS for three hours already. It had to do with fake tax returns that someone submitted last year to scam our refund.”

This conversation took place only a few days before the scheduled closing on a home in Vienna. My clients were totally upset, confused, and exasperated by this last minute crisis, especially since they had been told two weeks earlier that everything was “good-to-go” by their loan officer.

If you are planning to get a mortgage to buy a home, and you have received a letter from the IRS that someone had submitted a tax return in your name to get a refund, then you need to do some extra work that your loan officer may not know about.

The main issue on any loan is getting final “Underwriter Approval” so that your loan can close.

The problem is that most mortgages really aren’t reviewed by The Underwriter until a few days before closing.

And, the problem with the stolen identity tax refund fraud is that you will need to show The Underwriter written copies of your tax returns furnished by the IRS. And, you will need to submit Form 4506-T to the IRS.

Here’s the real complication: The old Internet system of ordering your past 1040’s was disabled after the IRS discovered that the Internet page was NOT SECURE and anyone could hack the database. When you submit Form 4506-T, getting them back from the IRS may take three weeks.

Yikes!

My tip is to get on this issue quickly so you won’t cause a delay in closing your home sale.

How to request returns from the IRS

To get written copies of your tax returns, you will need to submit Form 4506-T to the IRS.
My sources tell me to expect it to take three weeks to get the written transcripts to the lender.

In 2015, three clients told me that the were victims of this fraud.

One is a Surgeon, one is an Attorney, and one is a Judge.

The IRS has been notifying suspected victims in writing by mail.

Here are some excellent resources to help you understand what you can do:

If you are planning to buy a home and get a mortgage, and you know you have been a victim of this scam, then I highly recommend that you inform your Loan Officer so that Form 4506-T can be correctly ordered immediately. Remember, it takes three weeks.

DISCLOSURE: I am a real estate agent and not a CPA. This isn’t tax advice so consult with your tax advisor.