IRS Shuts Down Tool Used to Prevent Identity Theft After Security Breach

Posted on March 14, 2016

Identity Protection PINS, an online tool created by the IRS that was meant to help protect taxpayers who previously have been victims of tax refund fraud, has been suspended by the federal government after it was learned that the tool had the same security problem that allowed identity thieves to steal taxpayer information last year.

Identity Protection PINs are six-digit numbers needed by tax fraud victims to be able to file their taxes electronically. According to reports, the security flaw was uncovered after a taxpayer in South Dakota reported being the victim of tax fraud for two straight years.

“The IRS is conducting a further review of the application that allows taxpayers to retrieve their IP PINs online and is looking at further strengthening the security features on the tool,” the IRS said in a statement.

U.S. taxpayers received 2.7 million IP PINs by mail for the 2016 filing season. About 5 percent of those taxpayers used the online tool to retrieve a forgotten password. For taxpayers looking for a lost IP PIN, the IRS said it has “put strengthened processes and filters in place for this tax season to review these tax returns.” So far, the IRS said it has stopped 800 fraudulent tax returns from being filed through the creation of the IP PIN system.

According to the IRS, taxpayers who were issued an IP PIN should continue to file tax returns as normal. The online tool is mostly used by taxpayers who have lost their IP PINs and need to retrieve those numbers. About 95 percent of taxpayers receive their IP PIN via regular mail and have no need to use the online tool.

Tax refund fraud continues to be a billion dollar problem in the United States. In 2013, the federal government estimated that $5.2 billion in fraudulent tax refunds were paid to fraudsters. That number increased to an estimated $21 billion in 2014.

Have you been the victim of tax fraud or identity theft through your tax returns? Chicago tax attorney Patrick T. Sheehan can help!


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