Article Highlights:

  • Taxpayer First Act
  • Taxpayer Notification when a SSN is Fraudulently Used
  • Purpose of an IP PIN
  • Obtaining an IP PIN
  • Is an IP PIN Right for You?

With the passage of the Taxpayer First Act in mid-2019, the Treasury Department (i.e., the IRS) is required to establish a program to issue an identity protection pin (IP PIN) to any U.S. resident who requests one. For each calendar year beginning after the date of enactment, the IRS must also expand the issuance of IP PINs to individuals residing in such states as the IRS deems appropriate, provided that the total number of states served by the program continues to increase.

Often, identity theft and refund fraud victims may be unaware that their identity has been used fraudulently, or when they are aware, they may not be fully informed of the outcome of their case. The Taxpayer First Act addresses this situation by requiring that the IRS notify a taxpayer if it determines any of the following: there has been any suspected unauthorized use of a taxpayer’s identity or of that of the taxpayer’s dependents; if an investigation has been initiated and its status; whether the investigation substantiated any unauthorized use of the taxpayer’s identity; and whether any action has been taken (such as a referral for prosecution). Furthermore, when an individual is charged with a crime, the IRS must notify the victim as soon as possible, giving the victim the ability to pursue civil action against the perpetrators.

An IP PIN is a six-digit number assigned by the IRS to eligible taxpayers. This pin helps prevent the misuse of taxpayers’ SSNs on fraudulent federal income tax returns. The IP PIN was originally established several years ago to aid taxpayers whose SSNs had been used to file a fraudulent return or if a taxpayer’s SSN had been compromised and there was concern it could be used to file a fraudulent return. Recently, as a result of the Taxpayer First Act, the IRS has opened the IP PIN system to a variety of taxpayers.

In addition to taxpayers whose SSNs the IRS has determined are compromised for tax-filing purposes, IP PINs now are available to those who

  • filed their federal tax return last year as a resident of Florida, Georgia, the District of Columbia, Michigan, California, Maryland, Nevada, Delaware, Illinois, or Rhode Island or
  • received an IRS letter inviting them to “opt-in” to get an IP PIN.

Requesting an IP PIN is strictly voluntary. If you choose not to participate in the program, you can file your return as you normally would. If you are assigned or if you request an IP PIN, you must use it—along with your SSN—to confirm your identity on any tax returns filed electronically during the calendar year. A new IP PIN is generated for each filing season and can be retrieved starting in mid-January of each year by logging into the account you create with the IRS. At this time, if you choose to receive an IP PIN, you must use your IP PIN on all 1040 (current year and delinquent) returns filed during the calendar year.

To obtain an IP PIN, you must pass the IRS’s identity verification secure access process. To do that, you must register with the IRS and set up an online account that is only accessible with a username and password established during the registration process. This can require lots of verification information so the IRS can make sure you are not a scammer trying to obtain an IP PIN for someone whose identity has already been stolen. Next, you have to log into the IRS IP PIN Section, which requires double authentication: a password plus a 6-digit code that is sent to your cell phone. Once you have jumped through all those hoops, you can retrieve your IP PIN.

So, is an IP PIN right for you? That depends; the process is quite complicated, and you get a new number every year. So, you have to weigh the trouble and inconvenience it creates when your SSN has not been compromised with knowing you can always obtain an IP PIN if your SSN is compromised in the future or if you feel it may have been compromised. The decision is up to you.

Of course, if the IRS has already sent you a CP01A Notice—the annual communication from the IRS containing your unique 6-digit IP PIN and instructions on how to use it—you are already in the system. Please give this office a call if you have questions about IP PINs.