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The IRS and the Justice Department are working hard to combat stolen identity return fraud. But one important security tool is making life needlessly complicated for many tax filers.
To curb fraud, the IRS issues Identity Protection Personal Identification Numbers, or IP PINs to victims of identity theft. This year alone, it has mailed 2.7 million filers a notice of this security PIN, called a CP01A. Though IP PINs can be a quick and easy way for taxpayers to confirm their identities with the IRS and prevent stolen refunds, lost IP PINs add a new layer of challenges to tax filing.
As a site coordinator at a Volunteer Income Tax Assistance (VITA) program in Washington, DC, I have seen firsthand the difficulties taxpayers face if they lose or never receive IP PINs. Missing PINs are a common reason why electronic returns are rejected by the IRS, and this year, retrieving your IP PIN is more difficult than ever.
Taxpayers lose their IP PINs because they do not understand the CP01A notice or its importance. In many cases, the IRS sends PINs to filers it identifies as past victims of identity theft. But because the IRS catches most fraud before issuing a refund, many people have no idea they ever were victims, so they ignore the IRS notice. Moreover, people often confuse their new “identity protection PIN” with the electronic filing PIN they used to submit their return. It is not uncommon for people to forget about the CP01A notice or even throw it away. Filers who move frequently or are homeless may never have received their IP PIN in the mail. Many are unaware they even have an IP PIN until the IRS rejects their return.
How can taxpayers retrieve lost PINs? Our clients used to be able call an IRS hotline to receive new IP PINs immediately over the phone, which seemed a little too easy. Now, the IRS has a webpage where taxpayers can retrieve IP PINs. That tool was used by over 130,000 people in February and early March this year, but has been down for most of this tax season. The only other option our clients have is to call the hotline and wait for their IP PINs to be mailed to them, which can take two weeks or more.
If the IRS has your wrong address, or you moved since January 1 of this year, tough luck—you will have to file your return by mail and wait weeks or months to receive your refund. While tax filers wait to retrieve their IP PINs, they cannot access their refunds, which they often are counting on to pay bills. For our clients, the delay in receiving IP PINs is one more tax season headache.
How can the IRS fix this problem next year while still protecting filers from scams? Securing the IP PIN request website to allow for instant retrieval would be an ideal improvement, though other measures, such as making the CP01A easier to understand, would also help. The IRS also must consider the difficulties faced by people who move frequently and for whom timely filing is a financial imperative. It needs to do more to strike a balance between ease of filing and security against fraud.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
Martha Pantoja, left, helps Iris Castillo Ortiz prepare her income taxes at a community center in Nashville, Tenn., Thursday, April 10, 2008. Pantoja has been helping Hispanic immigrants in Nashville this tax season as a volunteer tax preparer for a United Way program. (AP Photo/Mark Humphrey)