22 April 2019

IRS Offers Extra Fraud Protection Only to a Few

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Starting this year, most taxpayers in three areas that have seen high levels of tax-related identity theft—Florida, Georgia and Washington, D.C.—are eligible for an extra layer of protection from the Internal Revenue Service. People who filed federal returns last year as residents of those jurisdictions can apply on the IRS website for an “identity protection personal identification number,” or “IP PIN”—an extra proof of their identity that, once obtained, must be included on their federal tax returns. These three locations have the highest per-capita percentage of tax-related ID theft, the IRS says.

The IP PIN program was launched in 2011, primarily for past victims of identity theft. Last year, the PINs were offered for the first time to a limited number of people seeking to e-file federal returns from Florida, Georgia and Washington, D.C.  So far, about 1.5 million people have IP PINs, the IRS says.  The pilot program is intended to help determine taxpayer demand and also the ability of the IRS to issue the PINs to a larger number of taxpayers.

People who sign up for the IP PIN program get a unique six-digit number each year that must go on their return. That prevents someone else from successfully filing a return in their name, even if fraudsters have their Social Security number, the IRS says.

Stolen-identity refund fraud—in which fraud artists use stolen personal information to file tax returns seeking refunds—has been a problem at the federal and state level for years.

Last week, a spate of fraudulent filings at the state level led the biggest provider of online tax-preparation software, Intuit’s TurboTax unit, to temporarily suspend electronic filing of all state tax returns. The company said its systems weren’t breached, and it resumed state e-filing about 24 hours later after tightening antifraud measures.

The Federal Bureau of Investigation has opened a probe to determine whether a computer data breach led to the filing of false tax returns through TurboTax. Meanwhile, some Journal readers have complained of finding that fraudulent federal returns had been filed in their names—and some state tax authorities and security experts have said some fraudulent state and federal filings include data apparently taken from 2013 returns.

A lot of people don’t yet know about IP PINs, says Raul O. Serrano, Jr., a CPA in Hollywood, Fla. But he says some clients have called and asked about them, and those clients who already have the extra security measure “feel very safe with it.” Colin Blalock, a CPA in Atlanta, says he recently suggested the IP PIN to a friend whose credit accounts were compromised and also in a case where a person going through a nasty divorce wanted to ensure that the other spouse couldn’t file a joint return.

Individuals who get an IP PIN shouldn’t reveal it to anyone other than their tax preparer—and only when they are ready to sign and submit a return, the IRS says. The PINs can’t be used on state returns.

Click here to access the full article on The Wall Street Journal. 

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