Extra Security For Your Federal Tax Return

By Chris Daunhauer

The IRS has long encouraged taxpayers to sign up to receive an annual identity protection PIN to help fight tax filing fraud and identify theft, but the adoption rate remains low, and very few taxpayers have heard it’s an option.  My wife and I were victims of filing fraud in 2008; and while we were never out any money as a result of the fraud, the headaches it caused us that year and for several years afterward was costly in other ways; resolving it required many hours of our time in phone, letter, and face-to-face contacts with the IRS.

Here’s how filing fraud works, at least as it happened in our case… a fraudster (we never found out whom) filed a federal tax return using our names and our SSNs and our mailing address on the return.  The fraudster reported low income but a house full of new dependents and loads of other deductions and refundable credits (all fictitious, of course).  His (or her) goal was to qualify for the biggest possible refund and trick the IRS into sending that big refund electronically to a just-recently-opened bank account controlled by the fraudster.

All of this occurs without the victim (in our case, my wife and me) knowing that it’s in process.  For many victims, the first clue that it’s happened to them is having their real / legitimate return be rejected by the IRS because a return for that same year for that name and SSN has already been filed.

In our case, the tip off was receiving a notice from the IRS letting us know that “our” return for the most recent tax year had been processed but that our refund was delayed pending a final IRS review.  (I knew something was up as soon as I read the IRS notice because we were under an extension and had not yet filed our return for that year.)  “Why would the IRS be sending us a refund if we have not even filed our return yet?” I wondered.  My posing that question to the IRS in response to the notice alerted them to the attempted fraud.  And it kicked off a long, multi-year ordeal – numerous calls and letters between us and the IRS, and even an in-person visit to the Jacksonville federal building to prove our identity, clear our names, and straighten out our income and tax records with the IRS.

All of this could have been avoided if we had taken advantage of the IRS annual PIN option — an option I did not even know existed at the time.  When the mechanics of the fraud became clear to me, I was aghast at how unsecure our federal tax filing system is.  Anyone with access to my name and SSN could send in a tax return as if they were me.  And do so without my knowledge in hopes of claiming a refund in my place.

If you do your own taxes, you probably know if you take advantage of the optional IRS PIN program or not.  But if you have someone else do your taxes, you may not know.  Look at your most recently filed 1040, near the bottom of the second page, at the far right side of the “Sign Here” section. 

For taxpayers who have signed up to begin receiving a PIN each year from the IRS, there should be a six-digit number shown in that section.  That’s a secret number that the IRS generates just for you and your SSN each year and then sends to you in a letter each January or posts to a secure website for you to log in and retrieve.

The IRS knows the taxpayers who have opted in to the annual PIN program, and expects to see those PINs when those same taxpayers submit their returns.  When you (or your tax preparer) include your IRS security PIN for that year in the “Sign Here” section of your return, it assures the IRS that the return really did come from you, because nobody else should know the PIN that was assigned to you for that year.  It’s an annually updated “password” of sorts, one that only you and the IRS knows.

Signing up to begin receiving an identity protection PIN each year from the IRS is easy and free.  Here’s how (from the IRS website) – https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin

https://www.taxpayeradvocate.irs.gov/news/nta-blog/identity-protection-pins-what-to-know/2024/02/

Sadly, only about 10% of taxpayers participate in the IRS security PIN program, and (not surprisingly) fictitious returns filed by fraudsters is still a major problem for the IRS (and for those taxpayers whose identities are stolen to create them).

Signing up to begin receiving an IRS PIN each year, and making sure to include each year’s PIN on your tax return (or forward it to your tax preparer), is a tiny bit of extra work, but it dramatically reduces the chance you’ll be the victim of a fraudulent tax filing done using your name and SSN.