There are few things more frustrating than attempting to file your tax return and finding out that a fraudster beat you to the punch. Generally, when this happens it means you’ve been the victim of identity theft - a fraudster has obtained enough of your personal information to file a tax return on your behalf. Not only is your tax refund going to be delayed if you were expecting one, but now you may have to potentially spend hours trying to sort out the resulting mess.
In order to help people combat this type of fraud, the IRS offers an Identity Protection PIN (IP PIN) program to help taxpayers secure their tax returns. In the past only those that had experienced tax identity theft or lived in certain states where identity theft was more prevalent were eligible to receive an IP PIN. Recognizing that fraudsters continue to get more sophisticated, and as the IRS workload related to fraud continues to climb, the IRS has opened the IP PIN program to anybody that would like to participate.
An Identity Protection PIN (IP PIN) is a six-digit number that prevents someone else from filing a tax return using your Social Security Number. This six-digit number is known only to you and the IRS. As it would be very difficult for a scammer to obtain this number, it significantly reduces the chances that the IRS would accept a fraudulent tax return in your name.
Starting in 2021, you may voluntarily opt into the IP PIN program as a way to help protect yourself from tax-related identity theft. To opt in you must pass an identity verification process. The first step of this process is to register for an account on IRS.gov. The IRS account provides beneficial information such as a dashboard that shows recent payments you’ve made to the IRS and information on amounts you may owe the IRS. You can also obtain transcripts of your tax records and access other information about your tax account that you might find useful. The registration process will walk you through verifying your identity. You’ll need several pieces of information in order to verify your identity including email address, your social security number, tax filing status, along with your mailing address, and one financial account number linked to your name (this could be a credit card, student loan, mortgage, auto loan.) You’ll also need a mobile phone linked to your name or the ability to receive an activation code by mail. Spouses and dependents are eligible for an IP PIN if they can pass the identity proofing process mentioned above. This would be beneficial if a couple needs to file separately or if there has been identity theft in the past.
If you are interested in opting into the voluntary IP PIN program you can visit the IRS website for formal instructions on how to apply: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin
It is also worth noting that if you opt into the IP PIN Program, be sure to securely provide the six-digit number to your tax preparer at the appropriate time so they can file on your behalf.
There are several other ways to help reduce the chance of tax identity theft. Here is a list of some of the ways you can make it harder for a thief to obtain enough information about you in order to file a tax return on your behalf:
1) Keep your Social Security Number private. Do not send it through email or provide it to anyone unless you are confident it is for a legitimate purpose.
2) File your tax return early in the tax season. For 2020 returns, the first day the IRS will accept returns is February 12, 2021.
3) Actively monitor your financial accounts for suspicious activity.
4) Be aware of the latest scams (i.e. phishing, IRS impersonators, robo-calls, demands for immediate payment via cash, wire transfer, credit card, or prepaid debit card). It is worth mentioning that the IRS almost always initiates communication through the mail. If you receive a phone call or text claiming to be the IRS, you should consider calling the IRS back at a known number instead of engaging in conversation with the person claiming to be from the IRS.
5) Shred bank and tax documents prior to recycling or discarding them. Also consider switching to paperless statements to reduce the amount of paperwork that contains personal information.
6) Be aware of who has access to your mail, especially around tax time. Consider signing up for Informed Delivery from the USPS. This generates an email with images of each piece of mail you are set to receive. Although you will get images of coupons and flyers arriving that day, you will also be able to see when financial account statements or other documents containing personal information are in route to you.
7) Be sure to do due diligence when choosing a tax return preparer.
8) Freeze your credit and check your credit reports to ensure no one has opened new accounts in your name.
None of these steps are fool proof, but used in conjunction with the IP PIN program they could help reduce the potential to become a victim of tax identity theft. For more on protecting your personal information, consider attending Foster & Motley’s
Cybersecurity Education Series.