Identity Theft And Taxes

Identity Theft and Taxes

“Houston, we have a problem” 

It seems every time I turn around another company's database has been hacked.

While this is not a tax strategy I feel like it’s super important and you may see this information pop up from time to time throughout the year.

Why this matters for taxes?

Hackers are after key data that they can use and your social security number and date of birth is what can be used to commit tax fraud.

If your information has been compromised and a fraudulent tax return has been filed then when you attempt to file your tax return electronically the IRS will “reject” the tax return with a code indicating that that social security number has already been used to file a tax return.

Now you feel violated and are faced with the long and slow process of filing your tax return by paper and fighting to get any refund that is rightfully yours.

What to do about this?

You can get ahead of identity theft by opting in to the IRS Identity Protection PIN program.

Simply put, the IRS will issue you (and your dependents if you jump through the hoops to get them a PIN as well) a six-digit number.

This six digit PIN is used to electronically file the tax return and without it that social cannot be used to file a tax return.

“When you have this special code, it prevents someone else from filing a tax return with

your Social Security Number,” said IRS Commissioner Chuck Rettig. “The fastest way to

get an Identity Protection PIN is to use our online tool but remember you must pass a

rigorous authentication process. We must know that the person asking for the IP PIN is

the legitimate taxpayer.”

The online tool uses Secure Access authentication which uses several different ways to

verify a person’s identity. 

Before using the “Get an IP PIN” tool, the IRS encourages you to review the requirements at IRS.gov/secureaccess.

For those who cannot pass Secure Access authentication, there are alternatives. 

Taxpayers with incomes of $72,000 or less and with access to a telephone should complete Form 15227  and  mail  or  fax  it  to  the  IRS.  

An  IRS  assistor will call you to verify your identity with a series of questions.  

For  additional  security  reasons,  taxpayers  who  pass authentication will receive an IP PIN the following tax year.

Those who cannot verify their identity remotely or who are ineligible to file a Form

15227 may make an appointment, visit a Taxpayer Assistance Center and bring two forms of picture identification. 

Because this is an in-person identity verification, an IP PIN will be mailed to the you within three weeks.

Taxpayers  who  obtain  an  IP  PIN  should  never  share  their  code  with  anyone  but  their trusted tax provider. 

The IRS will never call to request your IP PIN, and you must be alert to potential IP PIN scams.

Here’s what taxpayers need to know about the IP PIN before applying.

•   The Get an IP PIN tool will be available in mid-January. 

This is the preferred method of obtaining an IP PIN and the only one that immediately reveals the PIN to the taxpayer. Taxpayers  who  want  to  voluntarily  opt  into  the  IP  PIN  program  do  not  need  to  file  a Form 14039, Identity Theft Affidavit.

•   The IP PIN is valid for one year. Each January, the taxpayer must obtain a newly generated IP PIN.
•   The IP PIN must be properly entered on electronic and paper tax returns to avoid rejections and delays.
•   Taxpayers with either a Social Security Number or Individual Tax Identification Number who can verify their identities are eligible for the opt-in program.
•   Any primary taxpayer (listed first on the return), secondary taxpayer (listed second on

the return) or dependent may obtain an IP PIN if they can pass the identity proofing

requirements.

•   The IRS plans to offer an opt out feature to the IP PIN program in 2022 if taxpayers find it is not right for them. 

For confirmed victims of tax related ID theft then there is no change in the IP PIN program.

Those taxpayers should still file a Form 14039 if their e-filed tax return rejects because of a duplicate SSN filing. The IRS will investigate their case and once the fraudulent tax return is removed from their account, confirmed victims automatically will receive an IP PIN via postal mail at the start of the next calendar year.

IP PINs will be mailed annually to confirmed victims only and participants enrolled prior

to the tax filing year. 

Because of security risks, confirmed identity theft victims cannot opt out of the IP PIN program. 

Confirmed victims also can use the Get an IP PIN tool to retrieve lost IP PINs assigned to them.

Again, this information is not “tax savings” per se but knowing this and opting to be proactive can sure save a ton of time and effort down the road if this unfortunate trend affects you and your household.

Systems are in everything we do. And unfortunately, hackers systematically find ways to access data and put our data at risk of misappropriation and felonious use.

The government has a system for confiscating your business profits in the form of taxation.

You can fight back against both of these forces (at least for tax purposes) by implementing a system of your own.

Tax Reduction University offers the TRU path to achieve tax savings by providing a system to reduce your taxes and give you more resources in your life to do positive things and achieve your goals.