Tax identity theft is a serious issue for the IRS as fraudsters continue to find new ways to steal taxpayers’ Social Security numbers and other personal information to file false tax returns. According to a 2019 U.S. Government Accounting Office report, the IRS estimates it unwittingly paid at least $110 million in fraudulent tax refunds in 2017. The growing problem of tax identity theft affects both taxpayers and tax professionals who prepare returns for their clients.

To help fight fraudsters, the IRS created the Identity Protection PIN (IP PIN) to prevent fraudsters from obtaining a tax refund using a stolen Social Security number. It is a six-digit number that is similar to two-factor authentication to require two sources of identification and authorization to file a tax return. Initially, the IP PIN program was available only to professional tax preparers and victims of identity theft, but now the IRS is expanding the program to all taxpayers who apply for it.

The IP PIN Program – What You Need to Know

  • The IRS will automatically provide past victims of identity theft with an IP PIN.
  • By mid-January 2021, the IRS will open a portal to enable other taxpayers to register for the program. Taxpayers will not be required to file Form 14039 to register for the program.
  • Once an IP PIN is issued, taxpayers will need to confirm their identity through a verification process.
  • Spouses and dependents of taxpayers may also use the program, but they will be required to follow a separate verification process.
  • When filing their returns, taxpayers should carefully enter the IP PIN electronically or by paper to avoid rejection or filing delays.
  • The IRS will never request that taxpayers provide the IP PIN. Do not provide this information by email, fax or phone to anyone who claims to be from the IRS.
  • Taxpayers should remain vigilant against fraudsters and keep their IP PIN secure.

More information on the IP PIN registration process will be available in January at irs.gov.

If you have any questions about this topic, please contact DMJ.

Jess Bankhead, CPA
Jess Bankhead, CPA

Jess Bankhead is a tax supervisor in DMJ's Greensboro office and has several years of public accounting experience working directly on individual, corporate, partnership, and trust taxation.

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