Tax identity theft is when someone uses your stolen personal information, including Social Security number, to file a tax return claiming a fraudulent refund.
How can you fight against tax identity theft?
The IRS accepts the first return that is filed for the year, assuming there are no glaring errors on it. The simplest thing you can do to fight tax identity theft is to file your tax return as early in the season as possible. This prevents a fraudster from being able to sneak in and claim a refund before you can file. Stats show that most tax identity theft occurs early in the filing season, typically February and March.
What if you do not get all your documents to be able to file early, or you just want some added protection? The IRS offers a solution - an Identity Protection PIN (IP PIN). From the IRS's website:
An Identity Protection PIN (IP PIN) is a six-digit number that prevents someone else from filing a tax return using your Social Security number or Individual Taxpayer Identification Number. The IP PIN is known only to you and the IRS. It helps us verify your identity when you file your electronic or paper tax return.
How does the IP PIN work?
The IP PIN is required to file a Form 1040 series tax return. It is like two-factor authentication for your tax return. The PIN must be entered to file a return electronically. If it is not included on a paper return that is filed, the return will be subjected to additional identity verification procedures.
How to get an IP PIN
You can apply online after passing some identity verification protocols. If you are not able to do that, there is an offline process as well.
Who should get one?
If you have been the victim of identity theft, especially tax identity theft, in the past, you should definitely consider obtaining an IP PIN. Even if you are not aware of past identity theft, it is still possible your information is floating around out there without your knowledge. Getting an IP PIN is not a bad idea for most people.
Who should NOT get one?
If you are not able to pass the online identity validation and have to go the paper route, you may want to proceed with caution. Those who are able to use the online process to obtain an IP PIN can also use the online process to retrieve that number if it is misplaced. However, if you have to go the paper route to obtain the IP PIN, it is much more difficult to retrieve the PIN in the event it is misplaced. Without that PIN, the only way to file taxes is by paper, and the process takes much longer since it will be subjected to additional screenings to validate your identity.