The last few years have been difficult ones for the IRS with respect to security issues, and the agency is determined to improve security during this year's filing. Electronic filing is particularly vulnerable because of the speed of the process — it is a favorite method among thieves who steal information from taxpayers and file fraudulent tax returns in their name. As Bankrate.com Chief Financial Analyst Greg McBride points out, "Tax ID fraud is one of those things where somebody can have your Social Security number and they could have been sitting on it for a while, and you would have no idea until they go and file a bogus tax return under your Social Security number. You only find out at the point where your legitimate return gets rejected."
Betterment Head of Tax Eric Bronnenkant gives the following example: "Let's say someone steals your Social Security number and they file a return illegally using that, so then when you actually go to file your tax return, the IRS is going to say, 'Wait a minute, you already filed and we already sent you a refund.' Now you have to spend, let's say approximately six months, a year, some exorbitant amount of time fighting with the IRS to ultimately get the refund that you actually deserve."
Among the proactive steps that the IRS has taken is to eliminate the option of an electronic filing PIN (e-PIN) to prove your identity on your electronic filing. There are currently three options for verifying an electronic form: an IRS Self-Select PIN from a previous year's entry, entry of your previous year's adjusted gross income (AGI), or an IRS-issued Identity Protection PIN (IP PIN) number.
The IRS IP PIN Number is not available to the general public; you must meet eligibility requirements. It is a six-digit number assigned by the agency primarily to victims of identity theft, along with certain residents of Florida, Georgia, and the District of Columbia that are participating in an IP PIN Pilot program. IP PINs are mailed to recipients in December for the next year's filing and are only good for that year — a new IP PIN is mailed to you each December.
Once you are assigned an IRS IP PIN, you must use that as your identification tool for federal tax returns. Your electronic return will be rejected without it, and your paper return will be delayed until your identity can be properly verified.
If you lose your IP PIN, don't panic. You can use the Get an IP PIN online tool to retrieve your IP PIN. The opening page will list the items you need to prove your identity and retrieve your PIN.
The IRS Self-Select PIN is a five-digit number of your choosing. Any combination except all zeroes is allowed. You can choose a new Self-Select PIN for the purposes of signing an electronic return, but if you want it to serve as identification, you will need to use last year's Self-Select PIN number as this year's number.
If you need your 2016 AGI as proof of identity, you will find it on line 37 on Form 1040 for the 2016 tax year that you filed in 2017. For 1040A filers, the AGI is on line 21; for 1040EZ filers, the AGI is on line 4. First–time filers over age 16 should enter an AGI of zero.
Did you forget to keep a copy of last year's return? If you used a commercial tax preparer, you may be able to acquire a copy of your 2016 tax form from them. Otherwise, you can access your 2016 tax form by using the Get Transcript Online page on the IRS website. You can choose to access your transcript immediately online or have a transcript mailed to you. Mailed transcripts will arrive within five to ten calendar days of the request.
The online method requires stricter security measures, so if you find you don't have the necessary information, you may have to resort to the mailing method.
Go ahead and grumble about the extra steps if you must, but let's give the IRS credit. They are taking the necessary steps to reduce instances of tax identity fraud. Keep that in mind as you file your taxes, and let's hope that their measures succeed.
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