The IRS is urging taxpayers to take several steps now to make it harder for identity thieves to use stolen personal information to file fraudulent tax returns. In a September 4 security alert, the IRS and its Security Summit partners highlighted three tools that can add layers of protection: multifactor authentication, an IRS Identity Protection PIN, and a secure IRS Online Account. One of the easiest protections for individual taxpayers is an IP PIN—a six-digit number that helps the IRS determine whether a federal tax return filed using someone’s Social Security number or Individual Taxpayer Identification Number is legitimate.
An IP PIN Can Block a Fraudulent Tax Return
An Identity Protection PIN, commonly called an IP PIN, is a six-digit number known only to the taxpayer and the IRS. When someone with an IP PIN files a federal tax return, the number helps the IRS verify that the return actually belongs to that taxpayer. That can be particularly valuable because identity thieves may use stolen Social Security numbers and other personal information to file fraudulent returns and attempt to collect refunds before the real taxpayer files.
The IP PIN program isn’t limited to people who have already experienced tax-related identity theft. Taxpayers can voluntarily opt in to the program, while confirmed victims of tax-related identity theft automatically receive new IP PINs annually. Each IP PIN is valid for one calendar year, and the IRS generates a new number every year.
Don’t Give Your IP PIN to Someone Who Calls or Texts
An IP PIN is useful only if taxpayers protect it. The IRS says taxpayers should share the number only with the IRS and a trusted tax professional who needs it to prepare and file their federal return. The agency will never call, email or text someone asking for their IP PIN.
That’s an important warning because a scammer who already possesses some of a victim’s personal information may try to impersonate the IRS or another trusted organization to obtain the additional information needed to commit fraud. Tax professionals also can’t request an IP PIN on behalf of their clients. Taxpayers must obtain their own PIN directly from the IRS.
An IRS Online Account Adds Another Layer of Protection
The IRS is also encouraging taxpayers to establish their own secure IRS Individual Online Account. The account allows taxpayers to view important information, including their account balance, payment history, certain tax records, refund information and digital notices. Taxpayers can also use it to request and access an IP PIN.
There is another security benefit: establishing a legitimate account helps prevent a fraudster from creating an IRS online account in the taxpayer’s name. The IRS says an Individual Online Account is available to anyone who can successfully verify their identity.
Creating an account can also give taxpayers a convenient way to monitor their federal tax information for activity they don’t recognize.
Tax Preparers Have Additional Security Requirements
The IRS warning isn’t aimed only at individual taxpayers.
Tax professionals hold large amounts of sensitive information that can be extremely valuable to identity thieves, including Social Security numbers, income records, and financial information belonging to numerous clients. Under the Federal Trade Commission’s Safeguards Rule, tax preparation firms are required to use multifactor authentication to protect access to customer information unless a designated Qualified Individual has approved an equivalent or more secure access control in writing.
The IRS recommends using MFA across tax software, email, cloud storage and other services that contain sensitive client information. Tax and accounting professionals are also required to maintain a Written Information Security Plan designed to protect customer data.
A Stolen Tax Identity Can Become a Financial Headache
Tax-related identity theft isn’t merely an online-security inconvenience. If a criminal successfully files a fraudulent return using someone else’s information, the legitimate taxpayer can face complications when attempting to file their own return and receive a refund.
For a household counting on a tax refund to replenish savings, pay down debt or cover a major expense, a delay can create a real cash-flow problem.
An IP PIN doesn’t prevent every type of identity theft, nor does it keep someone from stealing personal information in the first place. Its purpose is more specific: helping the IRS verify whether a federal tax return filed under a taxpayer’s identity is legitimate. That’s why combining an IP PIN with good password practices, multifactor authentication and a secure IRS Online Account provides stronger protection than relying on any single tool.
Three Tax Security Steps to Take Before Filing Season
Taxpayers don’t have to wait until they’re preparing their next return to improve their defenses.
First, consider obtaining an IP PIN directly through the IRS. Once enrolled, remember that a new number is generated annually and must be protected like other sensitive financial information. Second, establish an IRS Individual Online Account rather than waiting until you urgently need a transcript, payment record or other tax information. Finally, turn on multifactor authentication anywhere sensitive financial or tax information is stored, including email accounts and financial services when the option is available.
Tax professionals should go further by ensuring MFA is enabled across systems containing client information and reviewing the security requirements that apply to their businesses. The IRS and Security Summit have spent more than a decade working with state tax agencies and the private tax industry to combat tax-related identity theft. For individual taxpayers, however, some of the most useful defenses can be put in place long before the next tax return is due.
What to Read Next
Your Property Tax Bill Went Up Again. Should You Appeal the Assessment?
How Tax Debt Derails Your Savings Goals — and 7 Resources to Get Back on Track
5 Property-Tax Relief Programs Seniors May Overlook Because of Confusing Names
Amanda Blankenship is Chief Editor at District Media, Inc., leading content strategy, quality assurance, and editorial operations across high-traffic personal finance sites like SavingAdvice.com and CleverDude.com. A Wingate University graduate with a BA in Communications (Journalism focus), she brings over a decade of experience in digital publishing, writing, and team leadership in the personal finance space.
Read the full article here
