Last Updated 1 year ago

About 2 years ago, a family member of mine filed their U.S. tax return right on time, expecting a much-needed refund to be deposited directly into their bank account. The refund was important. They were counting on it and hoping the IRS would move quickly. But weeks went by, and nothing came. After two months, they called the IRS to find out why the money hadn’t arrived.

The answer was more frustrating than they expected. The IRS agent said a letter had been mailed to them, and until the taxpayer received that letter, no one at the IRS could discuss the matter. But the letter never came.

Eventually, their CPA family member called back and discovered that the IRS had flagged the return for identity verification. It was one of those dreaded Fraud ID letters*. I asked the IRS to send the letter again. Two months later, the letter finally showed up.

Together, my relative and I called the IRS again. After sitting on hold for 45 minutes, the call dropped. We called back and waited once more. This time, the call stayed connected. After another long hold and 20 minutes with an agent, we finally began the identity verification process.

It’s a system where the agent enters information into the IRS database line by line. If the agent mistypes something or selects the wrong option, the taxpayer fails. Luckily, everything was entered correctly, and the agent marked the case for release. The IRS promised to process the return and send the refund.

Four months later, after another mail mishap, a check arrived. Because so much time had passed since the original return, the IRS couldn’t send the money by direct deposit into the bank account. And because they lived outside the U.S., depositing that check into a foreign bank account was another hassle. The whole experience was drawn out, painful, and exhausting.

This story is so frustrating because many people living abroad have gone through this exact situation.  It has become common for U.S. citizens abroad to face an uphill battle dealing with these letters. And too often, that frustration gets aimed at the tax preparer, even though they did everything right. As a taxpayer, it makes sense. The process feels broken. However, fraud is real, and this system is the IRS’s attempt to fight it.

Key Takeaways:

• IRS identity verification letters (e.g., 5071C, 4883C) freeze your tax return and refund until you verify.
• Expats are more likely to trigger these letters due to foreign IPs, unusual forms, or dormant filing history.
• Delays in receiving the letter may risk losing your refund due to the statute of limitations.
• Avoid issues by enrolling in the IP PIN program and updating personal information in a timely manner. 

What triggers these letters

When an identity fraud letter from the IRS lands in your mailbox, it triggers a familiar sinking feeling. For U.S. citizens living abroad, however, this scenario is not only more common but also layered with added stress and complexity. The combination of physical distance, cross-border paperwork, and the quirks of international mail make these situations uniquely difficult for expatriates to navigate.

Tax returns filed from overseas tend to raise red flags within IRS systems. That means letters like 5071C and 4883C are often sent to Americans abroad. These letters are not an accusation of wrongdoing. Rather, they are the IRS’s way of saying something about the return that doesn’t quite match expectations. 

Sometimes, it’s a simple mismatch in data. Other times, it is the use of unfamiliar forms or patterns. Common factors that can trigger these alerts are:

• Submitting a return from a foreign IP address
• Resuming filing after years of dormancy
• Reporting significant changes in income or credits
• Including special international forms like the Foreign Earned Income Exclusion (Form 2555) or foreign tax credits (Form 1116), which are on nearly every return for U.S. citizens living abroad 

These flags are not always signals of actual fraud but protective measures triggered by returns that fall outside the norm.

Once flagged, the IRS pauses everything. No refund is processed. No return is officially accepted. And the only way to move forward is for the taxpayer to verify their identity. According to IRS records, it can look like you never filed the return. But when you live abroad, that process gets more complicated than it sounds.

One major hurdle is international mail delivery. These identity verification letters are sent via traditional postal service to the mailing address on file. That might be your home overseas or an old place you have since moved out of. Either way, it is not unusual for weeks to pass before the letter finally lands in your hands. 

By then, the IRS’s standard 30-day response deadline may have expired. While the IRS does have some flexibility and often accepts late verifications, the delay can introduce serious complications. 

In particular, if the matter drags on too long, it can even affect the statute of limitations for recovering overpaid withholding or requesting a refund. This could mean missing out on a refund you were entitled to or jumping through additional hoops to retrieve it.

Online Verification Issues 

Verifying your identity online might seem a fast solution, but many U.S. citizens abroad face roadblocks. Historically, IRS systems have not played well with foreign IP addresses. 

Logging in or setting up an account can be impossible without a U.S. phone number or certain domestic documents. And even when the site does load, submitting the required ID documents often leads to technical errors. As a result, many expats are forced to make a phone call instead.

Phone Call Obstacles

Calling the IRS from abroad is no small feat. Time zone differences often mean the best time to call is in the middle of the afternoon. Long hold times are standard, and international dialing charges can add up quickly. 

Even once you connect, the process itself is careful and detailed. The IRS representative may ask for your filing status, prior year Adjusted Gross Income, the name of an employer from a W-2 or 1099, or the amount from a particular line of your last return. 

The process may stall or need a restart if you don’t have digital records or access to old forms.  These are all things that a tax preparer can answer easily, but to the average taxpayer, it is complete jargon and makes no sense.

First Steps to Take 

First and foremost, this process can be stressful.  Maybe start by finding a good relaxing meditation app or soothing ambient sound.  Call your tax preparer calmly and explain the situation. Go through the steps to resolve this, but understand it will take a long time.  Preparation goes a long way. Go over what will be included in the letter and what you need to know when calling.  

Often, with a power of attorney, your tax preparer can call on your behalf.  Before they do, they will need a lot of personal information, like birthdate, your mother’s maiden name, and other items that can sound like the answers to unlock forgotten passwords.  Not even the IRS has the details of your first pet’s name, so you can keep that a secret.  Make sure your tax preparer is someone you can trust.

How to Avoid a Fraud ID Letter 

There are ways to ensure you avoid this situation.  They are:

Identity Protection PIN Program 

The most effective thing you can do is enroll in the IRS Identity Protection PIN program**. Each year, you receive a unique six-digit code that must be included on your return. Having this code tells the IRS that your filing is legitimate, which can prevent your return from being flagged. If you have not yet enrolled, it is worth taking the time to do so.  

Enrolling in the IP PIN system has hurdles and traps to be aware of beforehand.  If you live abroad, you do not want to enroll in the program without first setting up an ID.me account.  

Otherwise, your IP PIN will likely get lost in the mail, and this can cause even worse problems with your tax return processing.  Setting up an ID.me account is not too simple when you live abroad, so check out our step-by-step guide.

Unchanged Personal Information 

Another way to avoid these letters is to use the same name, filing status, and mailing address each year. If changes are needed, update your records with the IRS in advance. Many expats use a consistent U.S. mailing address, like a trusted friend or professional mail service. This may help reduce delivery delays and ensure important letters arrive quickly. 

Another important tip is maintaining a digital archive of your prior tax returns and documents. This makes it much easier to answer IRS questions during the verification process. Even if you filed through a preparer, request a PDF copy of each return and store it safely in the cloud. When the letter arrives, you won’t have to scramble.

How to Handle Identity Theft Letters from the IRS 

If you receive one of these letters, start by verifying that it is legitimate. The IRS does not initiate these requests via phone, text, or email. A real letter will reference a specific form, contain a unique control number, and provide clear instructions for verifying your identity online or by calling. Please do not ignore it. Even if the official deadline has passed, respond as soon as possible. The IRS will usually still process your verification.

If online tools are working, follow the steps carefully. You’ll need to answer security questions, upload ID documents, and confirm whether you filed the return in question. If you did not file the return, say so clearly. This will alert the IRS to suspected fraud, and they will block the return from being processed. If the online route fails, call the number listed on the letter and be prepared for a detailed call.

During the call, take notes. Write down the date and time, the name of the representative, and any case or confirmation numbers they provide. If they ask for supporting documents, confirm exactly what is needed and how to send it. Keep this information organized in a dedicated folder so that you are not starting from scratch if the issue comes up again.

Facing the Dreaded IRS Identity Theft Letter Head-On 

These letters can be unsettling, but they are not the end of the world. They are a sign that the IRS is actively trying to prevent identity theft and protect your account. U.S. citizens abroad may face these letters more often, but they can also manage them effectively. By taking precautions now and knowing what to do when a letter arrives, you can move through the process calmly and confidently. 

Consider taking one step today to prepare, like saving last year’s return to your cloud drive or signing up for an ID.me (link to blog) account. And the next time a government envelope appears in your mailbox, you’ll be ready.

*https://www.irs.gov/newsroom/the-irs-alerts-taxpayers-of-suspected-identity-theft-by-letter

**https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin