I received notice from IRS today that in 2018 Paypal reported I earned 40K and I never reported it. This is fraud. How do I go about proving it? I never received 1099k

[allen-youso]

IRS lists an acct number and my SSN.   I never even used Paypal in 2018 and never earned income.  I'm at a loss how to prove this wasn't me, I'm suspecting fraud and someone using my SSN.

[Critter-3]

You will want to take the following steps:

1. (Most important) Follow the IRS procedures for reporting a fraudulent return, documented here: www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft
2. Monitor your credit reports through TransUnion, Equifax, and Experian for any suspicious activity.
3. File a police report with your local law enforcement agency.
4. File a complaint with the Federal Trade Commission at www.identitytheft.gov or the FTC Identity Theft Hotline at 1-877-438-4338 or TTY 1-866-653-4261.

If your Social Security number is compromised and you know or suspect you are a victim of tax-related identity theft, take these additional steps:

• Respond immediately to any IRS notice; call the number provided.
• Complete IRS Form 14039, Identity Theft Affidavit. Then print and mail or fax according to the instructions. 
• Continue to pay your taxes and file your tax return, even if you must do so by paper.

Additional Resources

The IRS has a host of useful information and resources on tax-related identity theft:

• A special section at IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers, and an assistance guide.
• For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.
• Taxpayers who may be at risk for identity theft (for example, your wallet, purse, or computer was recently stolen) should visit the IRS identity protection page.
• If you receive a suspicious email that appears to be from either the IRS or an organization closely linked to the IRS (such as EFTPS), visit the Report Phishing page at IRS.gov.
• Click here for general information on how to report tax-related fraud to the IRS.
• To prevent tax-related identity theft, see Protect Yourself from Identity Theft.

These sites can help you understand identity theft and how to protect yourself:

• FTC Identity Theft Resource Center (www.ftc.gov/idtheft)
• Identity Theft Resource Center (idtheftcenter.org) 
• OnGuardOnLine.gov

We're all vulnerable to this crime, but there are additional things you can do that will reduce your risk of becoming a victim.

• If you file by mail, do it at a post office, not from an unlocked mailbox in front of your house.
• If you file electronically, use a secure computer on a secure network.

Related Information:

• I got a call from the IRS demanding money. Is this a scam?
• I received a TurboTax email or text message, addressed to a stranger. Do I need to worry?
• How can I protect the tax files on my computer?

[Opus 17]

In addition to the above, you will want to report the situation to PayPal’s fraud department.

[Opus 17]

Also, you need to respond to the IRS office that sent you the notice within the deadline specified by that letter or else you may lose your right to appeal. Make sure you respond directly to the IRS notice in addition to filing any other fraud reports with the IRS.  If they sent you a CP 2000 notice, then they are asking you to tell them about your business activities. The IRS knows that even with a legitimate 1099K, it is not all taxable income, but it must be reported as business income along with any expenses. In your case, you should reply with a letter explaining that you did not have business activities, that you are not a PayPal vendor, and that you believe this is an instance of identity theft. You may wish to include copies of any police reports or other IRS fraud

reports that you have filed.