In honor of National Cyber Security Awareness Month in October, this post is dedicated to the fight against tax-related identity theft. The most prevalent type of tax-related identity theft occurs when someone uses your stolen social security number to file a phony tax return in order to claim a fraudulent refund – direct deposited into their own bank account. Typically, you are not even aware that this has happened until it’s simply too late. Your actual tax return gets rejected by the IRS since one has already been filed under your social security number. You’ll then be forced to paper file your tax return, prepare and file additional forms with the IRS alerting them of what has occurred, provide the IRS with documents to verify your identity (social security card and driver’s license), etc. All these required steps and necessary protocols will significantly delay the processing of your tax return and any refund that you are owed. To make matters worse, once someone has enough of your personal information to file a fraudulent tax return, this could be an issue that you’ll deal with in future years as well. What a headache!
What is an IRS Identity Protection PIN?
Luckily, the IRS, state tax agencies, and the nation’s tax industry – working together at the Security Summit – recently developed a solution: an Identity Protection PIN (also known as an “IP PIN”). It is a six-digit number that prevents someone else from filing a tax return using your social security number. Your IP PIN is known only to you and the IRS and helps verify your identity when you file your tax return. Once an IP PIN has been issued, you (and more importantly, scammers) are unable to file a tax return under your social security number without it. In the past, you needed to be a confirmed victim of identity theft to participate in the IP PIN program. Starting in 2021, however, you may voluntarily opt into the IP PIN program as a proactive way to protect yourself from tax-related identity theft. The Identity Protection PIN is issued in late December or early January and is good for the current filing season only. It will arrive via snail mail to your home address on Notice CP01A. Once part of the IP PIN program, a new PIN will be automatically generated for you each year. It’s important to put it in a safe place so that you can include it on your tax return (or provide it to your tax accountant) when tax season comes along a few months later. As previously mentioned, once you’re signed up, you’ll be unable to successfully file your tax return without it. It is a brilliant way to boost your security immunity and protect yourself against cybercriminals.
How to Obtain an Identity Protection PIN From the IRS
The easiest way to obtain an IP PIN is to use the “Get an IP PIN” online tool on the IRS website (https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin). Taxpayers must validate their identities. It will be necessary to have the following information available before getting started: your e-mail address, your SSN, your tax filing status, your mailing address, one financial account number that’s linked to your name (credit card, student loan, mortgage or home equity loan, home equity line of credit, or an auto loan), and your mobile phone number. The online tool is offline between November and January, so it’s important to get started soon if you are interested. There are no income limitations to apply online. If you are unable to validate your identity online and if your income is $72K or less, you can also apply for an IP PIN by submitting Form 15227 – Application for an Identity Protection Personal Identification Number by mail or fax (https://www.irs.gov/pub/irs-pdf/f15227.pdf). If you are unable to validate your identity online and if your income is above $72K, you must make an appointment to visit a local Taxpayer Assistance Center in person to apply for an IP PIN. For security reasons, tax professionals cannot obtain an IP PIN on behalf of their clients through any of these three methods – taxpayers must always obtain their own IP PIN.
Additional Considerations Regarding Identity Protection PINs
- If you file a joint tax return or claim dependents on your tax return, your spouse and/or dependents are not also required to opt-in to the IP PIN program. However, they are certainly welcome to. All that matters is that the IP PINs that have been issued for any person(s) appearing on your tax return are included at the time of filing.
- Should you lose your IP PIN, it can be reissued to you. It will be necessary to reverify your identity with the IRS. This process can take up to 21 days, so it’s important to act immediately if/when you discover that you’ve misplaced it.
- The IRS will never call, email, or text a request for your IP PIN. It will simply be entered into a designated spot of the tax preparation software (if filing electronically) or written into the box marked “Identity Protection PIN” in the signature area of the tax return (if filing by paper).
With data breaches and cybercrime on the rise, the need for tax fraud protection has never been greater. It’s important that you take the initiative to protect yourself – not only during National Cyber Security Awareness Month – but all year long. The IRS Identity Protection PIN is a terrific way to preserve and defend your tax identity.
Disclaimer: The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this commentary is intended to constitute personalized legal, tax, accounting, securities, or investment advice, nor a solicitation of any type. Information obtained from third party sources are believed to be reliable but not guaranteed. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.