It’s tax season.
Taxpayers concerned about tax fraud, which should be about everyone, have a new tool to protect them, thanks to a federal program directed by U.S. Sen. Susan Collins, R-Maine.
For the first time this year, anyone who applies for an Internal Revenue Service PIN (personal identification number) to protect against identity theft fraud can get one.
Until now, the IRS Identity Protection PIN program was only open to victims of IRS identity theft.
Responding to a growing number of criminals filing false tax refunds using names of legitimate taxpayers, Collins co-authored the Taxpayer Identify Protection Act, which was passed in 2019 and takes full effect this year.
“Each year tens of thousands of Americans are victims of tax refund fraud, and seniors are particularly vulnerable,” Collins said in a news release. “This PIN will prevent taxpayers from being ripped off by criminals and ensure that they receive the refunds to which they are entitled.”
The law means that the IRS is offering the PIN to all taxpayers who apply for one; but before they get a six-digit personal identification number taxpayers must pass a rigorous identify verification process with the IRS at https://www.irs.gov/newsroom/all-taxpayers-now-eligible-for-identity-protection-pins
When the PIN is issued, the individual’s taxes will not be processed by the IRS without that PIN. The goal is to ensure criminals are not falsely claiming a refund under someone else’s name, resulting in billions of dollars in loss to the federal government and major headaches for victims.
One of Maine’s top credit experts recommends taxpayers take advantage of the new program.
“IRS tax filing PINs used to be offered to those taxpayers who could demonstrate they were at risk of tax fraud,” Will Lund, superintendent of the Bureau of Consumer Credit Protection of Maine, said. “But Sen. Collins had Congress direct the IRS to expand the program, so it’s now available upon request,” he wrote in an email.
Lund said he used to consider getting an IRS PIN “overly cautious.”
“When the IRS itself began advising taxpayers to file early to decrease the chances that someone would falsely claim their refund before they could, that’s an admission by the IRS that it doesn’t believe it has internal controls sufficient to prevent fraud,” Lund said.
Claiming a PIN is similar to freezing personal credit reports; it does give an extra layer of protection, he said.
“In my opinion, we are just now beginning to see the emergence of personal information that was harvested during the massive data breeches that occurred from 2015 to 2020,” Lund said. “That information is being sold, resold and misused. Bottom line, there’s no longer any such thing as being overly cautious.”
Expanding the availability of an IRS PIN to those who want it is welcome news, Philip Doucette, a certified public accountant with Austin Associates in Auburn, said. Doucette said he has filed a number of clients’ tax returns and had the claims rejected by the IRS because the taxes had already been filed. The scammer had used Doucette’s clients’ names, dates of birth and Social Security numbers to file returns in the hopes of collecting refunds.
Straightening out the messes took months of frustration and freezing credit and accounts for his clients.
One of Doucette’s clients, an Auburn area businessman who asked that his name not be used, shared his story of being an IRS identify theft victim a few years ago. After his taxes were filed, he was notified they had already been filed — by a criminal who used his name and personal data.
Fortunately, the man wasn’t due a refund. “I may have owed taxes,” he said. “That proved it was a scam.”
However, because the IRS was issuing refunds without checking to see if they were warranted, if the fraud had not been detected eventually, Doucette’s client could have been held liable for the tax refund in his name that he never received.
Before things were back to normal for the man, it took several years of freezing his accounts and credit to protect them from being accessed, with his tax filing stuck in limbo the whole time. The experience was made worse by the fact that his children were going to college and his tax records were needed for the FAFSA college admission financial statements.
Eventually the man received an IRS PIN, which he now uses to file his taxes. Recently the man said he was pleased to hear the PIN program is now open to anyone who applies for it, saying it’s a good way to avoid going through what he did.
With all the data breeches and criminal identity theft in recent years, “the government has paid out billions in fraudulent tax claims,” he said. “I would recommend highly for anyone to get one.”
Five years ago the IRS was criticized for making it easy for criminals to file phony tax claims. All that was needed to file federal taxes electronically was a person’s name, date of birth and Social Security number. Budget cuts meant refunds were paid without the IRS confirming authenticity through W-2’s or 1099 documents.
In recent years the IRS has made progress improving programs and catching fraud. “It’s still going on, but I’ve seen less of it,” Doucette said. When fraud does happen, the process of sorting it out with the IRS “has been smoother.”
To illustrate progress, the IRS said identity thefts declined to 597,000 in 2017 compared to 883,000 in 2016. The amount of refunds protected from fraudulent returns was $6 billion in 2017, and $6.4 billion in 2016, according to the agency.