Every taxpayers' worst nightmare is identity fraud.  Some spend countless hours checking their bank accounts, credit cards, and other financial records to ensure their financial identity is secure.  However, beginning in January 2021, a new IRS Identity Protection PIN (IP PIN) Option is available to all taxpayers, which could potentially help soothe your identity theft concerns.

While these IP PINs have always been in existence, the PINs were previously only available to those with confirmed cases of tax-related identity theft.  Starting this month, the IRS now allows any individual to receive an IP PIN.  The expansion of this IP PIN Program is part of the IRS Security Summit effort. 

The Identify Protection IP PIN is a six-digit number, which prevents the misuse of Social Security numbers to file fraudulent tax returns.  The IP PIN acts as a "second verification" of the taxpayer's identity.  If a taxpayer receives a IP PIN, this six-digit number must be entered at the time of filing their return in order for the return to be successfully filed.

Opt-in to the IP PIN Program - preferred method

It is important to note that this IP PIN Program is operating on an opt-in basis for any taxpayer who has not received a IP PIN in prior years.  If you, your spouse, or a dependent would like to opt-in and receive a IP PIN, the quickest way to receive one is to complete the "Get an IP IP PIN" tool on the IRS website.  This tool is the only way to immediately receive your assigned number.  It only takes approximately 15 minutes to receive a IP PIN through the online tool.

If you are interested in using the online IP PIN tool, you must have the following information ready:

• Email address
• Social Security Number (SSN) or Individual Tax Identification Number (ITIN)
• Tax filing status and mailing address
• One financial account number linked to your name, such as:
• Credit card – last 8 digits (no American Express, debit or corporate cards), or
• Student loan – account number provided on your statement, or
• Mortgage or home equity loan, or
• Home equity line of credit (HELOC), or
• Auto loan
• Mobile phone linked to your name (for faster registration), or your mailing address. 

Opt-in to the IP PIN Program - alternate methods

If you cannot establish your identity using the above online IP IP PIN tool, there are alternative procedures available.  However, it is important to note that the alternate methods do not produce an immediate IP PIN.

1. Taxpayers with income of $72,000 or less:  Complete and Mail Form 15227 - Application for an Identity Protection Personal Identification Number. The IRS will then call to verify the taxpayer's identity through a series of questions.  This method does not produce a IP PIN for 2021. Taxpayers who use this method will receive a IP PIN for the next calendar year.
2. Taxpayers with income over $72,001, or who cannot verify their identity using the online tool: Make an appointment to visit a Taxpayer Assistance Center.  You will need to bring two forms of picture identification.  This method will allow you to receive a IP PIN through the mail within 3 weeks of your appointment.

IP PINs for Identity Theft

If you had previously received a IP PIN because of tax-related identity theft, there is no change to the current process.  You will automatically receive a IP PIN through the mail, or you can use the "Get an IP IP PIN" tool to retrieve a lost IP PIN.

If you are a victim of tax-related identity theft in 2020 and your tax return is rejected due to duplicate SSN filing, you should file a Form 14039 - Identity Theft Affidavit.  The IRS will investigate your case.  If your identity theft case is confirmed, you will automatically receive an Identify Protection IP PIN through the mail at the start of the next calendar year.

Other Important Notes

At this time, once you opt-in to the IP PIN Program, you will need to apply and receive a new Identify Protection IP PIN each year in order to file your taxes.  However, the IRS has stated that they plan to offer an opt-out feature beginning in 2022 for any taxpayers that opt-in to the program in 2021, but find that the program is not for them. 

If you choose to opt-in and receive an IP PIN, you should never share it with anyone, besides your tax preparer.  It is crucial that your tax preparer know your IP PIN, or your tax return will not be able to be successfully filed.

Although upon first glance it may not seem like a simple IP PIN would provide much protection against identify fraud, these six-digit numbers are actually extremely powerful.  These IP PINs can help put your mind at ease and take one more thing off your already full plate.  If you are interested in opting into the Identity Protection PIN Program in 2021 or have any questions, please contact your Dermody, Burke & Brown advisor.

The information reflected in this article was current at the time of publication.  This information will not be modified or updated for any subsequent tax law changes, if any.