IRS Identity Protection PINs: What You Need to Know
By Erin Sweet, CPA
With the growth of the digital age, tax fraud has increased significantly over the last decade. According to the Taxpayer Advocate Service, in the first three quarters of 2020, the IRS flagged 5.2 million tax refunds for fraud, nearly a 50% increase from 2019. Of these cases, approximately 1.9 million were tagged for identity screening. Clearing a case like this can cause delays in refunds of 18 months or more.
It is becoming more and more important to take security and identity protection into our own hands. While the Internal Revenue Service (“IRS”) does its best to send letters and notices if it suspects fraudulent activity, it also provides a service to taxpayers that allows them to apply for an identity protection PIN (“IP PIN”).
This voluntary program provides taxpayers with a six-digit number known only to the taxpayer and the IRS. Once a taxpayer has been assigned an IP PIN, the taxpayer’s individual income tax return will only be able to be filed with the IRS if the correct IP PIN is provided along with the filing. This prohibits someone who does not have the IP PIN from being able to file a fraudulent tax return on your behalf. An assigned IP PIN is only valid for one calendar year; therefore, taxpayers must obtain a new IP PIN each year. Due to the sensitive nature of the IP PIN, it should only be shared with a trusted tax preparer.
If taxpayers have already been a victim of identity theft, the IRS automatically issues an IP PIN each year.
If you wish to apply for an IP PIN, you may do so through the IRS website and online tool – Get an IP PIN. The application process involves a thorough validation and identification process. Before attempting this rigorous process, the taxpayer may review the IRS guidelines on How to Register for Certain Online Self-Help Tools. If the taxpayer is unable to verify his or her identity and the taxpayer’s income is $72,000 or less, he or she may paper file Form 15227 and the IRS will call the telephone number provided to validate your identity. Taxpayers who cannot validate their identities online, or on the phone with an IRS employee after submitting a Form 15227, or are ineligible to file a form 15227, may call the IRS to make an appointment at a Taxpayer Assistance Center. They will need to bring one picture ID and another identification document to prove their identity. Once verified, the taxpayer will receive an IP PIN via U.S. Postal Service within three weeks.
If you have been assigned an IP PIN, whether automatically due to previous identity theft issues or voluntarily through the opt-in program, please remember to provide your IP PIN to your tax preparer. Otherwise, the preparer will not be able to submit your tax return electronically to the IRS.
If you have any questions or would like assistance with applying for an Identity Protection PIN, please reach out to your tax advisor.