Calling All Tax Filing Procrastinators: Protect Yourself
Is it just a coincidence that the first full week in March is known as National Procrastination Week, and it just so happens to fall right in the middle of tax filing season? My CPA would argue that there is a strong correlation. This year the official tax season is just slightly shorter than in years past. The IRS began accepting and processing 2020 tax returns on February 12th. While some are waiting for the remaining tax documentation, others are just plain old, applying the guidelines from the procrastinator’s creed. Either way, I can’t blame you; filing your taxes is about as fun as eating glass.
Unfortunately, the longer you procrastinate, the more time is available for someone to file a fraudulent return in your name. According to an IRS Report released in 2019, the IRS identified and confirmed 3,741 fraudulent tax returns involving identity theft. With the number of people, I know who have already been a victim of tax fraud, I find this number extremely low. The last thing you want to see is a notice from the IRS stating that someone has already claimed your refund. While most likely your refund is not lost, you do open the door for a time-consuming IRS investigation and a significant amount of aggravation.
The good news is by taking steps to prevent identity theft in the first place, you can hopefully avoid the headache and extra time commitment in dealing with the IRS. Consider these steps.
Social Security PIN
An IP PIN is a six-digit number that prevents someone else from filing a tax return using your social security number. The IP PIN is known only to you and the IRS and helps the IRS verify your identity when you file your electronic or paper tax return. Before 2021, only people who were considered a confirmed victim of identity theft by the IRS were eligible for the IP PIN, in which case the IRS will automatically mail you the IP PIN. This year, the IRS allows people to voluntarily opt into getting the Identity Protection PIN, otherwise known as the IP PIN.
How to get an IP PIN
Fair warning, if you would like to opt-in, you must pass a rigorous identity verification process which will take about 15 minutes. To start, you will have to register with the IRS for online services. It will be helpful if you have the following information ready and available:
- 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:
- Credit card – last eight digits (no American Express, debit, or corporate cards) or
- Student loan – (Enter the student loan account number provided on your statement. The account number may contain both numbers and letters. Do not include any symbols.) Additionally, we can’t verify student loans issued by Nelnet. or
- Mortgage or home equity loan or
- Home equity line of credit (HELOC) or
- Auto loan
- A mobile phone linked to your name (for faster registration) or the ability to receive an activation code by mail
Your spouse and dependents are also eligible for the IP PIN, but they must also pass the identity proofing process. Keep in mind that your IP PIN is only valid for one calendar year, which means that you must obtain a new IP PIN for each tax filing year.
Alternatives to the Online Tool
If you’re volunteering for the IP PIN Opt-In program and you can’t successfully validate your identity through the Get an IP PIN tool, there are IRS alternatives.
The IRS Form 15227, Application for an Identity Protection Personal Identification Number PDF, is available for those making less than $72,000. Unfortunately, this option will only provide you a PIN for the next tax filing year and can’t be used during the same year of the application.
The Taxpayers Assistance Center allows in-person appointments to request an IP PIN. You will need to bring a picture id and another identification document to prove your identity. Once we verify your identity, you will receive your IP PIN via the U.S. Postal Service within three weeks.
Of course, IP PINS are not the only way to protect yourself. Keeping in mind the following best practices for keeping your data safe can help to protect you from tax identity theft too.
- Watch out for scams.
- Don’t carry your Social Security card or number.
- Send sensitive information over secure channels.
- File as early as possible.
- Only work with reputable tax preparers.
- Use strong passwords
The bottom line is, without any government exceptions or allowable extensions, your tax return is due no later than April 15th. Stop procrastinating and get it done.
This material is provided as a courtesy and for educational purposes only. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.