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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

More Taxpayers Can Use Powerful IRS Identity Theft Protection Tool in 2021

Any relatively long-term reader of this column knows that we devote considerable space to issues surrounding identity theft. It is an ever-increasing problem that sadly has already touched many of you (I know it has me).

The IRS and related tax filings are not exempt to identity theft problems. The IRS is a deep pocket that makes it a prime target for thieves, with individual taxpayers becoming the collateral damage of these efforts.

As a result, several years ago, the IRS came up with the idea of identity protection personal identification numbers, or IP PIN. An IP PIN is a six-digit number designed to prevent the misuse of Social Security numbers to submit fraudulent federal income tax returns. It helps the IRS verify taxpayers' identity and accept their electronic or paper tax return.

Originally, IP PINs were available only to those whom the IRS had determined were identity theft victims. Once issued, the IP PIN had to be used in the electronic filing of a tax return in order for the IRS to accept the return, and was critical for the processing of paper filed returns. Recently, the IRS has been running a limited pilot program, allowing other taxpayers to receive IP PINs on a voluntary basis if they wish to protect themselves.

Here's the big news. Starting in January 2021, the IRS will allow all individuals to receive an IP PIN. The IRS recently announced that it will unveil a portal in mid-January 2021, expanding to all individual taxpayers the opt-in program to voluntarily receive an IP PIN. The expanded initiative is part of the Security Summit effort between the IRS, state tax agencies, and the tax preparation industry.

To obtain an IP PIN, taxpayers will be able to go to the online "Get an IP PIN" tool to obtain an IP PIN. The online tool employs Secure Access authentication, which uses several methods to verify a person's identity. While there are other ways to obtain an IP PIN as discussed below, the IRS says the online tool is the preferred method, since it is the only one that immediately gives the PIN to the taxpayer.

The IP PIN received will be valid for one year, and the taxpayer will have to obtain a newly generated IP PIN each January. However, the IRS did say it plans to offer an opt-out feature to the IP PIN program in 2022 for taxpayers who find the opt-in program is not right for them.

Taxpayers with either a Social Security number or an individual tax identification number who can verify their identity are eligible for the opt-in program. Any primary taxpayer (first on the tax return), secondary taxpayer (second on the tax return), or dependent may obtain an IP PIN if he or she can pass the identity proof requirements.

There is no change to the IP PIN program for victims of identity theft. Taxpayers who want to voluntarily opt into the IP PIN program will not need to file a Form 14039, Identity Theft Affidavit.

As an alternative, taxpayers who cannot establish their identity online and pass Secure Access authentication can follow other procedures to obtain an IP PIN, though they will not receive one immediately.

Those with income of $72,000 or less with access to a telephone can complete Form 15227, Application for an Identity Protection Personal Identification Number, and mail or fax it to the IRS. The IRS will then call taxpayers to verify their identity by asking a series of questions. For security reasons, taxpayers who pass authentication through this process will receive an IP PIN the following tax year.

Finally, those who cannot verify their identity remotely or who are ineligible to file a Form 15227 can make an appointment to visit a Taxpayer Assistance Center, bringing two forms of picture identification to enable an in-person identity verification. An IP PIN will be mailed to those individuals within three weeks of the meeting.

If you receive an IP PIN, it's important to understand that you should never share it with anyone with the exception of your tax preparer. The IRS will never call you and ask for your IP PIN. No doubt creative identity thieves will come up with innumerable IP PIN scams, so be alert as with anything else.

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