Uncoding Rejection Code 902

Don't let someone run away with your tax refund.Tax professionals, including CPA’s and Enrolled Agents, have seen a significant increase in identity theft in regards to their client’s tax returns.

According to the Internal Revenue Service “Tax Fraud is expected to soar again this tax season, and hit a whopping $21 billion by 2016, from just $6.5 billion two years ago”.  So let’s break down this process of exactly what happens and what you can do to protect yourself this year.

You have spent hours collecting all your important tax documents and provided these to your CPA, and your CPA finally gets your return filed.  Next thing you know, your CPA is calling you and telling you he has received Rejection code 902 with the statement “Taxpayer TIN: The return header must not be the same TIN of a previously accepted electronic return for the return type and tax period indicated in the tax return”.  English please! What this means is a tax return has already been electronically filed AND accepted (aka a check cut for a refund) using your Social Security number.  The next thing your CPA does is verify we have the correct social security number and that you didn’t already submit a tax return through an at home tax software. If the answer to this is no and your social is correct, you have been a victim of tax return fraud.

The first question people ask is why on earth would someone steal my identity for a tax return.  Well the answer is simple.  The IRS only requires three things to file a return: Name, Date of Birth, and Social Security number.  Thieves file a completely false return using these three things to produce a return that is eligible for a tax refund.  The IRS accepts tax filings as soon as January 1st, but employers aren’t required to submit correct employment information until March.  By this time, roughly half of all refunds have been paid out, including the fraudulent return with your information.

The good news is the IRS allows additional time to perfect the return for resubmission.  In most cases, a paper return will need to be mailed in to the normal IRS service center.  For the paper return to be considered timely, it must be postmarked by the later of the due date of the return or 10 calendar days after the date the IRS gives notification that it has rejected the return or that it cannot accept the return electronically for processing. For example, if the rejection happens on April 13th, the paper return does not have to be filed before the normal tax date of April 15th.  You will have ten days from the rejection to mail in the paper return.

In addition, the taxpayer will need to submit some additional forms including, Form 14039 Identity Theft Affidavit and Form 8948, Preparer Explanation for Not Filing Electronically.

The last step in the process is probably the most notable step the IRS is taking to protecting taxpayers from fraud.  The IRS has rolled out an identity protection PIN.  Essentially, if you have been a victim of fraud, you will be assigned a unique PIN number that will need to be entered on any future electronic filings of returns.  Unfortunately, at this time, PINs are currently only available to filers with past fraud cases as well as to taxpayers in Georgia, Florida and the District of Columbia.

In addition to the PIN, it is recommended that you place a fraud alert with bank and credit cards companies, credit reporting agencies, as well as, with the Federal Trade Commission at identiytheft.gov.

The IRS is continually working to improve security features but until then, just be aware of the rejection code and what it means.  And of course, contact a CPA with any questions, concerns, or instructions on what to do next.