An IRS IP PIN is the only sure way to stop tax return theft from happening to you. Below we share six excellent reasons to get one, and show you how.
Tax refund theft will steal an estimated $21 billion in 2016, causing massive hassles and headaches for millions of taxpayers who must then prove their identity to the IRS. Anyone can be hit by this easy-to-do crime, and an IRS IP PIN is the only way to prevent it from happening. Anyone can get an IRS IP PIN and filing is easy, but those who wait may be too late.
1. Tax Refund Theft is Skyrocketing
Tax refund theft is the IRS’s #1 scam for 2014, victimizing millions of Americans. Incidents of the crime went up 66% from 2012 to 2013, resulting in more than $5 billion in stolen tax refunds. By 2016 it’s expected to hit $21 billion.
The crime has become so popular and easy that inner city police departments have reported that drug dealers and other organized criminals who once relied on violent crime are switching to it to make a living.
2. Anyone Can Be Hit by Tax Refund Theft
Tax refund theft is so popular with thieves because it’s so easy. All a criminal needs is an unsuspecting taxpayer’s name and social security number. Names and social security numbers are the only method the IRS uses to check the identity of most taxpayers. Since the IRS accepts tax returns starting in February and many taxpayers don’t file until April, the thieves can simply fill out a fake tax return in the meantime using the victim’s name and social security number and the IRS will send them a check. The results can be devastating for the victims, resulting in mammoth hassles, paperwork, lost hours on the phone and tax refunds that get held up for months or even years. The victims often have a very difficult time proving their identity to the IRS.
How easy is it for thieves to get your name and social security number? Very. Dozens of legitimate businesses and organizations require customers and participants to divulge social security numbers as a matter of course. The list of services and companies that ask for the numbers include hospitals, credit card companies, banks and tax prep services like TurboTax. While these entities themselves aren’t likely to start stealing tax refunds, in many cases dishonest employees can steal social security numbers and sell them at illegal websites. Even IRS employees themselves aren’t immune to stealing the numbers. Databases at honest organizations can also be hacked – another way for thieves to get what they need.
2. An IRS IP PIN is the Only Way to Stop Tax Refund Theft
An IRS IP PIN isn’t the same thing as an e-file PIN. An IP PIN adds a layer of protection to a taxpayer’s IRS account. An IP PIN is just an additional number the IRS can add to a taxpayer’s account. When someone gets an IP PIN, the IRS requires them to submit the PIN with their return from then on. Any tax return submitted in that person’s name without the PIN will be rejected.
If a tax return thief tries to submit a fake return for someone who has an IP PIN, the IRS will reject the return. Since it’s common for people to share their social security numbers with businesses and organizations but not to share their PINs, it’s very difficult for thieves to get them. The IRS expects to issue 1.2 million IP PINs in 2014.
While taxpayers can also decrease their risk of being victimized by tax refund theft by filing early, filing early doesn’t offer 100% protection from the crime.
3. The IRS Claims IP PINs Are Only For Fraud Victims But…
Anyone can get an IRS IP PIN.
The IRS Identity Protection Web Page states that IP PINs are only for people who’ve already been victimized by tax refund theft or have been specifically invited by the IRS. However, any taxpayer can get invited. All it takes is filling out IRS Form 14039 – the Identity Theft Affidavit. The form says it’s for identity theft victims or “potential” victims. A call to the IRS will verify that a potential victim is defined as anyone whose social security number may possibly be stolen. Since who has ever shared their social security number with a bank, credit card company, hospital or even the IRS falls into this category, everyone can file the form.
While this may seem like cheating, the IRS actually wants people to apply for PIN numbers. It’s the only way they have to fight an estimated $21 billion in losses and even more from lost employee time in 2016.
4. IRS IP PINs Aren’t Available After January 1st
The typical thing to do is to wait until January to worry about tax refund theft and then try to file for an IP PIN. People who wait will be disappointed, since filing for an IP PIN in January will create a PIN that doesn’t start working until the following year. Someone who files for a PIN in January of 2016 won’t be protected from tax refund theft until the 2017 tax season. Filing now ensures the PIN will start protecting the taxpayer immediately.
5. It’s Easy to Get an IRS IP Pin
Filing IRS Form 14039 is easy. It only requires entering the taxpayer’s personal info and mailing it in.
Those who haven’t already been victimized by tax return theft should check box two. Box two is for those who “have experienced an event that could lead to identity theft.” Since even IRS employees can steal social security numbers, even submitting a tax return to the IRS is an event that could lead to identity theft. This may seem like a joke, but a call to the IRS will verify it.
Taxpayers then enter their name, address and telephone number on the form. They must also submit a photocopy of a driver’s license, passport, social security card or other identifying document. The only other steps are signing the form and mailing it to the address listed at the form’s bottom.
Married couples who file jointly only need to file for one IP PIN. When filing, the spouse who filed for the IP PIN will need to enter their name and social security number first on all future tax returns.
6. An IRS IP PIN Doesn’t Make Filing Any Harder
One worry for those considering filing for an IP PIN is that it might make doing their taxes harder. People who use TurboTax or TaxACT may think the process will be further complicated by having an IP PIN. In fact the process is easy. Tax prep software like TurboTax and H&R Block Online are set up to handle IP PINs. All any taxpayer has to do when filing with software is enter their IP PIN at the appropriate time. Those who file paper returns just enter their IP PIN in the blank at the bottom of their return.
One Reason Not to Get an IRS IP PIN
Some people who’ve filed for IRS IP PINs have claimed that having a PIN is stressful. Having to keep track of the number and worrying about losing it are real concerns. A taxpayer who files for an IP PIN will have to include the PIN with every future return. Anyone who loses the PIN will have all future returns rejected by the IRS until the problem is sorted out, and that can be a hassle.
The benefits of being protected from tax refund theft outweigh the risks of losing the PIN. Some taxpayers keep their IP PINs in home safes. Others keep them written in a safe place in the house or stored in a laptop file. While there’s no guarantee an IP PIN won’t also be stolen, tax refund thieves are generally looking for the easy money that comes from taxpayers who aren’t protected by an IP PIN, and there’s plenty of that around.