Tax-related identity theft often goes unnoticed until it causes real complications. One common scenario is when a fraudster files a tax return using your information before you do. In such cases, refunds may be delayed, filings rejected, and resolution can take months.For individuals with complex returns, the disruption can be especially frustrating.
Fortunately, the IRS offers a tool to help reduce this risk: the Identity Protection PIN, or IP PIN.
What Is an IP PIN?
An IP PIN is a six-digit number issued by the IRS that adds an extra layer of security to your tax filing. Once assigned, it must be included with your return. If the correct PIN is not provided, the IRS will reject the return.
This helps ensure that only you can file using your identity.
Who Can Get One?
Since January 2021, the IRS has made IP PINs available to any taxpayer who can verify their identity. It is no longer limited to those who have already experienced identity theft. The IRS uses ID.me, a secure third-party service, to complete the verification process.
How It Works Each Year
IP PINs are updated annually. Every January, the IRS issues a new PIN that must be used for that year’s tax filing. Using an outdated PIN can delay your return, so it is important to store the current number safely and keep it accessible.
When an IP PIN Might Be a Good Fit
Not everyone needs an IP PIN, but it may be worth considering if you:
- Were affected by a data breach
- File returns involving multiple income sources or business entities
- Want added protection against return delays
- Prefer taking preventive steps rather than reacting to problems later
One Important Consideration
Once enrolled, your IP PIN becomes a required part of your annual tax return. If it is lost or entered incorrectly, it can slow down your filing process. For many, the added organization is a small tradeoff for greater protection. For others, it may not be necessary.
For more information on applying for an IP PIN, visit here.
Our View
Like many IRS tools, an IP PIN can be valuable in the right situation, but it is not essential for everyone. Whether or not it makes sense depends on your overall tax situation and your comfort level with managing extra steps in the process.
If you would like help deciding whether an IP PIN is appropriate for you, your LGA Advisor is here to provide guidance.
