By Sebastian B. Murolo, CPA
To combat identity theft, the IRS since 2011 has aided certain taxpayers by issuing them an identity protection personal identification number (IP PIN), which helps the IRS verify taxpayers' identity and accept their filed tax returns. After a progressively larger pilot program, the IRS in mid-January opened the program nationwide to allow all eligible taxpayers to opt in to receive an IP PIN. More taxpayers are now likely to turn to their tax preparers and advisers to help them decide whether to do so.
Initially, the IRS unilaterally issued an IP PIN to taxpayers whose identities had been stolen and used on a fraudulent tax return the IRS had received. Subsequently, the program was also made available to taxpayers who could document their identities had been stolen or compromised in other ways, by filing Form 14039, Identity Theft Affidavit. The pilot program then allowed taxpayers in a limited number of states to voluntarily opt in, starting in 2015. Finally, in News Release IR-2021-9, the IRS announced the program's nationwide expansion to all taxpayers who can verify their identity by specified procedures, effective Jan. 12, 2021.
Taxpayers may now voluntarily opt in to the IP PIN program as a proactive way to protect themselves from tax-related identity theft. Spouses and dependents are also eligible for an IP PIN. The IRS mails taxpayers who opt in a CP01A Notice containing their six-digit IP PIN or assigns one via its "Get an IP PIN" online tool described below. As with confirmed identity theft victims, taxpayers opting in will receive a CP01A Notice each year with their new IP PIN or retrieve it from Get an IP PIN.
HOW TO OPT IN
Taxpayers may opt in either by mailing or faxing Form 15227, Application for an Identity Protection Personal Identification Number (IP PIN), by using the Get an IP PIN tool, or visiting an IRS Taxpayer Assistance Center in person. To file Form 15227, taxpayers will need:
- A valid Social Security number (SSN) or individual taxpayer identification number (ITIN);
- Adjusted gross income of $72,000 or less; and
- Access to a telephone.
Upon processing the form, the IRS will then call the taxpayer and validate his or her identity. If their identity is successfully validated, the taxpayer will receive a CP01A Notice with an IP PIN for the next filing season.
The Get an IP PIN tool (available at irs.gov/GetAnIPPIN) can be used for a current filing season and will usually be quicker and more convenient at other times as well. Still, taxpayers using it must go through a secure access authentication process if they do not already have an IRS online account. Information they must have ready includes an email address, their SSN or ITIN, and other information listed at irs.gov/SecureAccess. The Get an IP PIN tool is generally unavailable from mid-November through mid-January each year, the IRS advises.
Taxpayers who cannot verify their identities online or by phone and who are ineligible to file Form 15227 may verify their identity in person at a Taxpayer Assistance Center. Taxpayers should bring two forms of identification, including one government-issued photo identification. After a taxpayer's identity has been verified through the in-person process, an IP PIN will be mailed to the taxpayer within three weeks.
WHETHER TO OPT IN
Note that once taxpayers opt in to this program, they currently cannot opt out, although in 2022 an opt-out feature is expected to be available, the IRS stated in the news release.
The decision to opt in may depend also on how confident taxpayers are in properly using the number, since a mistake or omission will prevent e-filing or delay the processing of the return. Also, they should know that if they move during a tax year, they must file a change of address using Form 8822, Change of Address, to be sure to receive the CP01A Notice to use in the next return filing season. If a taxpayer fails to receive a notice or loses it, however, he or she can usually retrieve a current IP PIN by using Get an IP PIN or calling the IRS to have their IP PIN reissued by mail, by following instructions available at irs.gov.
Of course, the main consideration in determining whether to opt in to an IP PIN is how confident the taxpayer feels that his or her identity has not been compromised. Many taxpayers reported receiving erroneous Forms 1099-G, Certain Government Payments, for 2020 or another indication of unemployment compensation fraud involving their state account. The IRS suggests these taxpayers consider obtaining an IP PIN (IRS News Release IR-2021-24).
Although fraudulent tax filings have fallen in recent years, data breaches of personal information have continued to increase in frequency and size. An IP PIN may provide at least some peace of mind for those whose personal information may have been compromised in that way — in other words, almost anyone.
Sebastian B. Murolo, CPA, MBA, CMB, is an associate professor and chair of the Business Department at Queensborough Community College CUNY in Bayside, N.Y. To comment on this article or to suggest an idea for another article, contact Paul Bonner, a JofA senior editor, at Paul.Bonner@aicpa-cima.com or 919-402-4434.