Starting in January 2021, the IRS will expand the Identity Protection (IP) PIN Opt-In program to all taxpayers. In determining whether to enroll in the program, taxpayers should consider the benefits and the potential drawbacks. Read on for a complete overview of the IP PIN Opt-in program.
As our world becomes more digital, taxpayers should consider the possibility of an identity thief utilizing their stolen personal information to file a tax return claiming a fraudulent refund.
The Identity Protection Personal Identification Number (IP PIN), as implemented in 2011, was initially offered only to confirmed victims of identity theft (IDT). Through the Opt-In program, taxpayers who are not identified theft victims may choose the more rigorous identity verification program as an added precaution against identity theft.
The Opt-In program allows taxpayers who are able to verify their identities to receive a six-digit IP PIN, which functions to prevent fraudulent federal income tax returns by adding a layer of identification beyond the social security number.
The IP PIN is used only on federal tax Forms 1040 and 1040PR/SS. State tax agencies have their own personal identification systems.
Because of the rigorous verification process and the frequency with which PINS are updated, the risk of users falling victim to fraudulent federal tax return claims decreases significantly.
The verification process requires applicants to provide a Social Security Number (SSN) or Individual Tax Identification Number (ITIN), home address, tax filing status, and one financial account number linked to their name.
Once enrolled in the program, taxpayers must obtain a new IP PIN annually. This ensures identity thieves will not have the opportunity to access an account through the previous year’s information.
To benefit from this added layer of security, users must never reveal their IP PIN to anyone other than their tax professional. The IRS website clearly states they will never ask for your IP PIN and that phone calls, emails, or texts asking for your IP PIN are scams.
Although the program acts as an additional layer of protection from tax-related identity theft, it may not be the best option for all taxpayers.
Because taxpayers enrolled in the program must enter the six-digit IP PIN in their tax software product or provide it to their trusted tax professionals who prepare their tax returns, there is potential for issues to arise when users lose or forget their IP PINs.
The IRS website states, “Correct IP PINs must be entered on electronic and paper tax returns to avoid rejections and delays. An incorrect or missing IP PIN will result in the rejection of your e-filed return or a delay of your paper return until it can be verified.” Taxpayers need to realistically assess their ability to manage their IP PIN and provide it when needed prior to enrolling in the program.
How to Enroll
The IRS’s “Get An IP PIN” tool provides a convenient and timely option for taxpayers who would like to obtain an IP PIN. Taxpayers who do not already have an account must register with the IRS.
Although not available at the moment, applicants can utilize this option starting in mid-January 2021. Expect to spend about 15 minutes to enroll in the program. The process will run smoothly if users obtain all necessary documents prior to beginning the application. A list of required information can be found on the IRS website.
Applicants may also use alternative, less expedient routes to obtain the IP PIN such as by phone or in person.
Making a Decision
If you are particularly concerned about identify theft, the Opt-In program offers peace of mind. However, the program also requires taxpayers to manage an additional element to ensure timely, hassle-free processing of their returns. Thankfully, your decision is not final. Should taxpayers find the program does not benefit them, the IRS plans to provide an opt-out option in 2022.
Take some time to assess your particular needs, and speak with a Hantzmon Wiebel tax professional to determine your next steps.
Disclaimer of Liability
Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.