Tax fraud involving identity theft is big business. The Internal Revenue Service (IRS) wants to help you understand your risks, and be proactive in preventing others from gaining access to your tax ID and data.
An initiative from the Security Summit is encouraging business owners and eligible taxpayers to opt in to a security program offered by the IRS. The Security Summit is a group developed by the IRS that partners with FinCen entities, software developers, tax and financial entities, and others. The group is divided into six groups, each of which focuses on a special interest like identifying better authentication practices, responding to strategic threats, and taxpayer awareness, among other topics.
The IRS is encouraging taxpayers to register for an IP PIN to thwart identity thieves who have gained access to social security numbers which they can use to file fraudulent tax returns. A false tax return can be filed and a refund obtained without the knowledge of the individual from whom identifying information has been stolen.
Between June and August of 2021, there have already been 222 reports of data theft from tax professionals. At this rate, the number of identity thefts this year will outstrip totals in 2019 and 2020. These large-scale data breaches may represent hundreds of taxpayers with each report. Here are things to know about the IP PIN program:
- The program is voluntary. Anyone with a Social Security number or Individual Tax Identification Number (ITIN) who is able to verify their identity can enroll in the program.
- An IP PIN is a six-digit number generated each year after you opt-in to the program. The number is used to confirm your identity on your tax forms filed during the current tax year. An IP PIN for identity verification can be used only on Form 1040-SS, 1040-PR and Form 1040.
- If your IP PIN is incorrect on your return, the tax form will be rejected. A paper return with an inaccurate IP PIN will take longer to process given the need to authenticate your identity.
- An IP PIN offers a form of identity verification that changes annually. While it is important that you keep your number private, it will be changed the following year so the impact of compromised data is limited.
- If you lose your IP PIN there are processes to retrieve the PIN or contact the IRS for assistance.
Verifying your identity on your tax return speeds your return and most importantly—keeps other people from claiming it.
Contact us if you are involved in an IRS civil audit or other tax controversy
With offices in Chicago and Cleveland, the tax attorneys at Robert J. Fedor, Esq. LLC deliver aggressive representation for clients throughout the USA and abroad. We offer strategic solutions to tax challenges including criminal tax matters, offshore tax questions, and payroll tax issues. To learn more or to schedule a free consultation, call 800-579-0997 or contact us.