“When you have this special code, it prevents someone else from filing a tax return with your Social Security number.”

In January, the Internal Revenue Service expanded its Identity Protection (IP) PIN opt-in program nationwide. The program is now available to all taxpayers who can properly verify their identities. Previously, this program was only available to confirmed victims of identity theft. The program is voluntary, allowing taxpayers to opt in if they choose as a proactive method of protection from tax-related identity theft.

The IP PIN is a six-digit number assigned by the IRS (and known only to the taxpayer and the IRS) to eligible taxpayers to help safeguard their personally identifiable information from being used on fraudulent federal income tax returns. In fact, tax refund identity theft is number five on the IRS list of top tax scams, which we wrote about in a prior Alert. An IP PIN also helps the IRS verify a taxpayer’s identity and accept their electronic or paper tax return. As the IP PIN is designed to be used exclusively for filing tax returns, it is very unlikely to be circulated outside of the IRS or tax providers, and is thus much less likely to be exposed in a data breach.

“When you have this special code, it prevents someone else from filing a tax return with your Social Security number,” said IRS Commissioner Chuck Rettig. “The fastest way to get an Identity Protection PIN is to use our online tool… .”

Interested taxpayers can use the “Get an IP PIN” tool at IRS.gov/IPPIN. Any taxpayer who wants to opt in to the program must pass an exhaustive identity verification process that utilizes the IRS’ Secure Access authorization. Before using the tool, taxpayers should review the requirements on the IRS website. The online tool may be the preferred means to obtain a PIN for many taxpayers, as it is the only method that immediately reveals the PIN to the taxpayer.

Much like a tax preparer’s Preparer Tax Identification Number, the IP PIN will be valid for only one year and must be renewed each year. Generally, the IP PIN tool is not available from mid-November through mid-January, so we anticipate that taxpayers will largely retrieve their PINs during tax season, from mid-January through April. The PIN is not limited to the primary taxpayer either, as the secondary taxpayer (person listed second on the tax return for jointly filed returns) or any dependent is able to apply for a PIN as long as the identity verification requirements are satisfied. Taxpayers may choose to opt out of the program in any subsequent year starting in 2022.

For taxpayers who cannot pass Secure Access authentication, there are some alternatives. Taxpayers with incomes of $72,000 or less and with access to a phone can fill out a Form 15227 and mail or fax it to the IRS. An IRS employee will call the taxpayer to verify their identity by asking a series of questions. This is the only instance where the IRS will directly call a taxpayer, as any initial outreach from the IRS is always conducted by mail. Taxpayers who pass the authentication will receive an IP PIN the following tax year.

Taxpayers who cannot verify their identities remotely or who are ineligible to file a Form 15227 can make an appointment with an IRS Taxpayer Assistance Center and bring two forms of picture identification. Because this is an in-person identity verification, an IP PIN will be mailed to the taxpayer within three weeks.

Taxpayers who get an IP PIN should never share their code with anyone but their trusted tax provider. The IRS will never call to request the taxpayer’s IP PIN.

Note that there’s no change in the longstanding IP PIN program for confirmed victims of tax-related identity theft. Those taxpayers should still file a Form 14039 if their e-filed tax return is rejected because of a duplicate Social Security number filing. The IRS will look into their case, and once the fraudulent tax return is removed from their account, confirmed victims automatically will get an IP PIN through the mail at the beginning of the following calendar year.

IP PINs will be mailed every year to confirmed identity theft victims only and participants enrolled prior to 2019. Because of security risks, confirmed identity theft victims cannot opt out of the IP PIN program. Confirmed identity theft victims can use the Get an IP PIN tool to retrieve any lost IP PINs that have been assigned to them.

TAG’s Perspective

With the rising prevalence of remotely conducted business, perpetrators of fraud or identify theft schemes have become more aggressive and developed new ways of obtaining taxpayers’ information. Just as many websites have instituted multifactor authentication to protect from security breaches, the IP PIN program is an attempt by the IRS to apply similar means of protecting each taxpayer’s personal information. If your Social Security number has been exposed or compromised, we strongly advise obtaining an IP PIN.

For all others, there are advantages and disadvantages of an IP PIN. While the additional protection provided is compelling, there are drawbacks and inconveniences that could result from opting into the program. First, remembering to apply each year may be strenuous. In addition, it is possible that the additional layer of protection could result in a delay in the processing of your tax return. Lastly, 2021 is a test year for the program, as it is the first year of the roll out to all eligible taxpayers. As such, there may be glitches or issues associated with the novelty of the program and you may not want to be involved this time, especially when it involves your tax matters. For some, the inconvenience of retrieving this information online each year or maintaining the notice you receive in the mail may be a small price to pay for the increased security on your IRS tax account. For others, the inconveniences and potential hiccups may be too much to handle despite the increase in tax-related identity theft.

For More Information

If you would like more information about this topic or your own unique situation, please contact Sean R. Schoppy, John I. Frederick or any of the practitioners in the Tax Accounting Group. For information about other pertinent tax topics, please visit our publications page.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.