The short version
An IRS notice shows up saying you underreported your income, and it lists wages from an employer you have never heard of. You did not forget a job. Someone used your Social Security number to get hired, their pay was reported to the IRS under your number, and now the computer thinks that money was yours.
This is employment identity theft, and it is a different problem from someone filing a fake return to steal your refund. Here the thief wanted a paycheck, not your refund, and the fallout is a tax bill for income you never saw. The good news: the fix is well-defined, and the single most important move is counterintuitive. Do not pay it, and do not add the phantom wages to your return. Here is the full response.
What the law actually says (primary authority first)
The notice you most often receive is a CP2000. The IRS describes it as a mismatch notice, not a bill: “The income or payment information we received from third parties, such as employers or financial institutions, doesn’t match what you reported on your tax return,” and it states directly that “This notice isn’t a bill.” It is the automated underreporter system noticing that a W-2 filed under your SSN was not on your return.
When the mismatch is caused by identity theft, the IRS tells you exactly how to answer. On the CP2000 page: if someone misused your name and SSN for wages, “Send your reply with a completed Form 14039, Identity Theft Affidavit.” In other words, you disagree with the notice and attach the affidavit that reports the theft.
The IRS also names the other ways employment identity theft surfaces: a CP01E notice telling you your SSN “may have been used by another person for employment purposes”; a notice from the Social Security Administration saying your benefits were “adjusted/denied because of wages you didn’t earn”; or a “Form W-2 or 1099… from an unknown employer.” Any of these is the same underlying problem wearing a different envelope.
How it works in practice
Here is the response, in order.
1. Do not claim the income, and do not amend to add it. This is the step people get wrong out of fear. The IRS guidance is explicit: do “not include the income on your tax return or file an amended return” for wages that are not yours. It is not your income, so it does not belong on your return.
2. Respond to the CP2000 by its deadline, and disagree. Reply by the date on the notice. As the IRS instructs, “State whether you agree or disagree with the notice and include any supporting documentation.” You disagree, because the wages are not yours.
3. Attach Form 14039, the Identity Theft Affidavit. Send it with your CP2000 reply, per the IRS’s own instruction, so the identity-theft flag travels with your response.
4. Fix your Social Security earnings record too. This is the part unique to employment identity theft. The wages are also polluting your Social Security record, which can distort your future benefits. Contact the Social Security Administration to verify and correct your earnings record. Two agencies are involved: the IRS handles the tax account, the SSA handles the earnings history.
5. Lock your tax account with an IP PIN. Get an Identity Protection PIN to keep the same SSN from being used against you on the filing side going forward.
A note on which identity theft this is. If your own e-filed return was rejected because a return was already filed under your SSN, that is refund fraud, a different situation with its own response. Employment identity theft is the mirror image: your return files fine, but income you never earned shows up attached to your number. The tell is a CP2000 or a W-2 from an employer you never worked for.
The numbers
| Metric | Figure | Source (year) |
|---|---|---|
| Ways victims typically learn of it | CP2000, CP01E notice, SSA statement, or W-2/1099 from an unknown employer | IRS, Employment-Related Identity Theft (2025) |
| CP2000 nature | Third-party income mismatch notice; “isn’t a bill” | IRS, Understanding Your CP2000 Notice (2025) |
| Correct treatment of the phantom wages | Do not report them; do not file an amended return to add them | IRS, Employment-Related Identity Theft (2025) |
| Affidavit to attach when it is identity theft | Form 14039, sent with your CP2000 reply | IRS, Understanding Your CP2000 Notice (2025) |
| Agencies whose records need correcting | 2 (IRS tax account and SSA earnings record) | IRS, Employment-Related Identity Theft (2025) |
What this means for you
The instinct when the IRS says you owe is to pay or to quietly amend. With employment identity theft, both are the wrong move, because the income was never yours. The right move is to disagree on the record, attach Form 14039, and let the IRS and the Social Security Administration correct their files. Answer by the deadline on the notice; a CP2000 you ignore can turn into an actual assessment, so the disagreement has to be filed, not just felt.
Do not stop at the tax notice. The same fake employment sits in your Social Security earnings record, and that can quietly reduce the benefits you have earned later. Correcting the SSA side is part of the job, not an optional extra. And once it is sorted, an IP PIN closes the filing door so the same number cannot be turned against you again.
Related reading
- Someone Already Filed a Tax Return Under Your Social Security Number. Here Is What to Do., the refund-fraud sibling to this piece.
- The IP PIN: The Simplest Way to Stop Someone From Filing Taxes in Your Name, the free lock that stops your SSN from being used on a filed return.
- Primary sources are linked inline above: Employment-Related Identity Theft, Understanding Your CP2000 Notice, and Identity Theft Central.
How Sheepdog Tax Resolution can help
A CP2000 with a deadline is stressful, and employment identity theft adds a second front at the Social Security Administration. I handle both. I start with a short diagnostic: confirm the wages are not yours, draft the CP2000 disagreement with Form 14039 attached, and map the steps to correct your Social Security earnings record, then set you up with an IP PIN so it does not recur.
I am a CPA and Certified Fraud Examiner, veteran-owned. I do not make outcome promises; the IRS and SSA decide these on the facts and their own timelines. What I can do is make sure you respond correctly and on time, that you are not taxed on a stranger’s paycheck, and that both agencies’ records get corrected. To start, email noah@sheepdogtax.com with a short description and the notice.
Sources (primary authority first, then secondary commentary)
- IRS, Employment-Related Identity Theft. https://www.irs.gov/identity-theft-fraud-scams/employment-related-identity-theft
- IRS, Understanding Your CP2000 Notice. https://www.irs.gov/individuals/understanding-your-cp2000-series-notice
- IRS, Taxpayer Guide to Identity Theft. https://www.irs.gov/newsroom/taxpayer-guide-to-identity-theft
- IRS, Form 14039, Identity Theft Affidavit. https://www.irs.gov/pub/irs-pdf/f14039.pdf
- IRS, Get an Identity Protection PIN (IP PIN). https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
- IRS, Identity Theft Central. https://www.irs.gov/identity-theft-central
Prepared by Noah Green, CPA, CFE.