Avoid Identity Theft During Tax Season

Tips to avoid identity theft during tax season

Protect your taxpayer identity and personal information from scammers

Today’s scam artists use the latest, sophisticated technologies to steal your data so it’s more important than ever to protect your personal information from identity theft, especially during tax season.

We all seem to know someone who had their identity stolen, and this year, the fraud is big in unemployment claims. For example, my neighbor who was fortunate enough to work through 2020 recently received a notice that she had claimed, and received, unemployment benefits in a state she had not lived in for over 30 years!

The Federal Trade Commissions, 2020 Consumer Sentinel Network indicates that in 2019, out of 3.2 million reports, they saw an increase from 2018 to 2019 of fraud (with 1.7 million cases – 53% of all reports) and identity theft (650,572 cases – 20% of all reports). “In 2019, people filed more reports about Identity Theft (20.3% of all reports), in all its various forms, than any other type of complaint,” states the report.

To combat this rising crime, the IRS has administered a program for over a decade to confirm taxpayers’ identities who have been victims of identity theft. The program is called the Identity Protection PIN, or IP PIN program, and it’s a private, six-digit code known only by the taxpayer and the IRS.

If someone enters the wrong code when filing their taxes, the system rejects the electronic return. Then, the taxpayer must file a paper return, which we know takes much longer to process. However, this gives the IRS time to catch, deter and prevent tax fraud.

For several years, the IP PIN program was only available to victims of identity theft. Now, any taxpayer can apply!

Even the IRS fell victim to fraudsters in 2016 when identity thieves tried generating e-file PINs for stolen social security numbers. This caused the IRS to shut down the online PIN service for a short time. This highlights what’s at stake with tax fraud. And ultimately, this costs the taxpayers in lost revenues to support government programs. On a personal level, it can delay your tax return and refund from being processed for several months.

Since this cyberattack and making security adjustments, the IRS began expanding the IP PIN program regionally to individuals on a voluntary basis. Now, this program is available to any taxpayer who can verify their identity. The initial IP PIN application involves a vigorous verification process, and once finalized, you receive a new PIN number each calendar year (issued by mail or retrievable online).

How to Get Your Identity Protection PIN

You can apply for the IP PIN program easily online at IRS.gov/IPPIN from mid-January thru October. Select, “Get an IP PIN.” Then, create an account, verify your identity and you get your official number immediately. Note that you receive a new IP PIN every year. And currently, you can’t opt-out of the program, but the IRS is looking to change this in 2022.

If you can’t apply for your IP PIN online, the IRS provides other options:

Avoid identity theft during tax season
Avoid identity theft during tax season

• “If your adjusted gross income is $72,000 or less, you may complete Form 15227, Application for an Identity Protection Personal Identification Number, and mail or fax to the IRS. An IRS customer service representative will contact the taxpayer and verify their identities by phone. Taxpayers should have their prior year tax return at hand for the verification process. Your IP PIN will be mailed to you.

• If you cannot verify their identities online or by phone and have adjusted gross income greater than $72,000, you must contact the IRS and make an appointment at a Taxpayer Assistance Center to verify their identities in person. Taxpayers should bring two forms of identification, including one government-issued picture identification. Your IP PIN will then be mailed to you.”

Remember never to share you IP PIN with anyone but your trusted tax provider. The IRS will never call, text or email you to request your IP PIN, but scammers will attempt to steal it from you.

Identity theft during tax season and beyond is not going away!

Authorities are trying to stop fraud, but identity thieves are always looking for new ways to scam innocent people out of their well-earned funds. An IP PIN is one way to deter their efforts.

Specifically, I know a young mother with two daughters who was the victim of identity fraud. She was waiting to file her return until April because she qualified for the earned income credit and the child credits and was looking forward to her refund check to supplement a waitress’ income. Unfortunately, someone had already filed a tax return with her social security number and requested similar credits.

Now this hard-working mother had to submit her tax return via mail and wait… and wait and wait. Then, she had to go through a process to prove she was who she said she was. As she was preparing for the following tax season, she still did not have her refund or tax return issues cleared. However, she did have an IP PIN which made that current year go smoothly. The refund for the prior year eventually came through about 3 or 4 months later.

If you don’t think identity theft can happen to you, think again. Now is the time to put as many precautions in place as possible. Protect yourself, your family, and the assets you worked so hard to earn!

View this short video from the IRS on how to get your IP PIN here in English and Spanish.

For additional information to protect yourself against identity them during tax season and help prepare your taxes, please contact me here.