Identity theft is an ongoing problem, with an estimated one in 15 people affected in 2017. Often when identity theft is mentioned, though, it refers to your information being used to make purchases. However, you could also be affected when it comes to your tax refund. By simply swiping your Social Security number and your name, a fraudster can file a return on your behalf and have your refund sent directly to him. Realizing the growing epidemic, the IRS has created a PIN that can be used to help keep taxpayers safe.
The IRS issues Identity Protection PINs to taxpayers who have been identified as high risk for taxpayer identity fraud, including previous victims and those in states where the IRS is piloting the program.
IRS Pin Defined
Called the Identity Protection PIN, this six-digit number is issued to certain taxpayers on an invite-only basis. Eligible taxpayers will receive a notice by mail alerting them of their new number and including instructions on how to use it. You can’t request an Identity Protection PIN unless you received that letter or you filed your federal tax return last year using an address in Florida, Georgia or the District of Columbia. This is because the Identity Protection PIN program is still in the pilot stages and those three states were included in that program.
The pilot program is designed to assess taxpayer demand for a PIN to help keep their information secure. Florida, Georgia and the District of Columbia were chosen for the test phase because those three states have the highest rate of tax-related identity theft in the country. Once issued a PIN, you’ll have to include it on all future Forms 1040 and you’ll get a new PIN at the end of each tax year.
Who Receives a PIN?
Not everyone is permitted to be part of the IRS’s PIN program. If you received a letter with a PIN, you may have been a prior year victim of taxpayer identity theft. If you weren’t, it could be simply that the IRS has identified you as a potential victim, perhaps due to a known breach that included your tax data. By following the steps to get a PIN, you can take the measures necessary to protect yourself.
Of course, one of the most obvious reasons you might have been issued a PIN is that you live in one of the three states that were chosen for the pilot project. If you’re in Florida, Georgia or the District of Columbia, you’re among the fortunate taxpayers who were able to take advantage of the new program. Those in other states have asked how to participate and been told it is not yet available in their area. As the program is tested in more states and gradually rolled out to the entire country, more people may find themselves being invited to set up a PIN, even when they have no previous history of identity fraud.
Getting Your PIN
If you’ve been invited, you’ll go to the designated IRS site and click on the button for "Get an IP PIN." There, you’ll create an account and input information from your invitation. As an added security measure, your identity will be verified before the PIN is issued. You’ll run into trouble if you’re one of many consumers who had your credit frozen with Experian. You’ll need to unfreeze your credit temporarily, but you can resume it once your identity has been verified and your PIN has been issued.
If you do qualify for a PIN and can’t access one online, you can call the IRS at 800-908-4490, Monday through Friday between 7 a.m. and 7 p.m. your time. The representative will go through the steps of verifying your identity and reissue your PIN to your address, but it can take up to 21 days. However, if you’ve moved during the tax year or it’s after Oct. 14 and you haven’t filed your taxes, you may need to go ahead and compile a paper tax return without your PIN, then request a PIN after that process is complete.
Tax Identity Fraud Risks
Although taxpayer identity theft is nothing new, both the IRS and the public have become increasingly aware of it in recent years. But instead of dealing with individual fraudsters off the street, the IRS is noticing attacks are more organized and global in nature, making battling them more complicated. Although there are tools available to help the IRS prevent fraud, taxpayer information exists on computer systems across the world, making it much more difficult to control information like Social Security numbers falling into the wrong hands.
Complicating matters is the fact that the IRS system itself has fallen victim to security breaches over the years. But any system that has your Social Security number could put you at risk if it experiences a security breach. Although the IRS catches the majority of fraudulent tax returns, it may still slow down your tax return, which will be a slight inconvenience, but at least you’ll be able to get your refund without extra steps.
If You’re an Identity Theft Victim
It’s important to note that even if a data breach affects your Social Security number, that doesn’t mean a return will be filed on your behalf. If it does happen and the IRS suspects it, you’ll get a letter from the IRS with instructions on what to do next. However, you may also learn about a data breach when you submit your return electronically and your return shows that it’s already been filed. If this happens or you notice your return seems to be taking an especially long time to process, check Where’s My Refund? to see if you can get an update. If you can’t, contact the IRS as soon as possible to find out if a return has already been filed on your behalf.
If you learn you’ve been a victim of taxpayer identity theft, the first step is to file a complaint with the Federal Trade Commission at https://www.identitytheft.gov/. You’ll also want to contact one of the three major credit bureaus and put a “fraud alert” on your credit records. You’ll also need to contact your financial institutions and any creditors that might be affected by information of yours that was stolen.
If You’re a Taxpayer Fraud Victim
If you’ve been a victim of taxpayer identity fraud, the IRS has a program that can help. IRS Identity Theft Victim Assistance is designed to help walk taxpayers through the process of resolving such a situation. If the IRS suspects fraud, you’ll be contacted by mail, but whether you’re contacted or discover it yourself, you can fill out the Identity Theft Affidavit, which alerts the IRS that there has been a problem. You’ll also complete a paper tax return and enclose the affidavit with it. Once both have been received, you’ll receive a confirmation by mail.
A special team is designated to handle fraud cases, and they’ll take care of processing your return from there. If you’ve been a victim of taxpayer fraud, you may be placed in the PIN program and issued a number each year after that. This will protect each of your returns moving forward.
Troubleshooting PIN Problems
Once you’re issued a number, you’re unlikely to have many IRS IP PIN problems. However, one problem you may encounter is a lost PIN. Even though you’ll be issued a new one at the end of each tax year, it still can be misplaced. More likely, though, is that you never received the one the IRS sent because it was lost in the mail.
If you’ve been issued a PIN but you don’t have it, you can simply log in to your account on the IRS site where you originally got the PIN. You may be asked to verify your identity for your own protection. If you never registered the first time, you can simply sign up and input your information and get the PIN sent to you.
Inputting an Incorrect PIN
Unfortunately, once you’ve been issued an IRS pin code for taxes, you’re obligated to input it correctly when you file. If you enter it incorrectly, the IRS will reject it and you’ll have to file again using the corrected PIN. If you don’t enter one at all, not realizing one had been issued to you, you’ll need to log in to your IRS account and get the right PIN before you can file your taxes.
The process of being rejected and resubmitting is fairly quick if you file electronically. If you file a paper-based tax return, the delay between feedback on the error you’ve made and hearing about it so that you can resubmit will be longer. The IRS will make an attempt to validate the information and verify that you are the taxpayer in question. However, if you aren’t the primary taxpayer, you won’t enter your own PIN on a tax return. It will only matter if your primary taxpayer has been issued a PIN.
Understanding Taxpayer Identity Theft
A common misconception is that any instance of identity theft puts your tax refund at risk. The truth is, criminals need very specific information to file a tax return on your behalf. Having your credit card number, home address or phone number alone won’t do it. Even a breach involving your medical records won’t matter if it doesn’t include crucial data necessary to file a tax return pretending to be you. However, since many businesses do store Social Security numbers, you may be at risk in more locations than you think.
You’re at the biggest risk if both your Social Security number and earnings information were stolen. In other words, the more information a fraudster can input on a tax return, the easier it will be to pretend to be you. This is most likely to happen through a security breach with your employer or your own computer if you have stored copies of past returns there.
Preventing Taxpayer Identity Theft
Although there’s never a 100 percent guarantee that you won’t fall victim, there are things you can do to reduce your risk. The first is to protect your information as best you can. This includes ensuring you keep your Social Security number safe at all times. If you carry it around with you, reconsider that, since a lost wallet could be all it takes to put your taxpayer identity at risk. You should also invest in malware protection for your own computer and only give your Social Security number out to others when absolutely necessary.
If you’re self-employed or own a small business, you may find you’re asked to provide your Social Security number every time you sign a new client. The W-9 Form you fill out is designed specifically to capture your tax information so you can be paid. You may complete a dozen of these or more, depending on your client load. The good news is, for business purposes, you can get an Employer Identification Number that will allow you to continue to work without putting your Social Security number at risk.
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- IRS: IP PIN pilot continues in Georgia, Florida and the District of Columbia
- IRS: Data Breach: Tax-Related Information for Taxpayers
- IRS: Refunds
- IRS: IRS Identity Theft Victim Assistance: How It Works
- IRS: Identity Theft Affidavit
- IRS: FAQs about the Identity Protection Personal Identification Number (IP PIN)
- IRS: Apply for an Employer Identification Number (EIN) Online
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Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.