Taxpayer identity theft concerns involving unemployment benefits
IRS expands Identity Protection PIN Opt-In program
During the COVID-19 pandemic, the IRS has noticed increased cases of identity thieves fraudulently filing claims for and receiving unemployment benefits on behalf of taxpayers.
These taxpayers are now receiving Form 1099-G, Certain Government Payments, showing an amount of taxable unemployment benefits they never received.
On January 28, 2021, the IRS provided guidance for taxpayers who find themselves in this circumstance.
Taxpayers who were incorrectly issued Form 1099-G for unemployment benefits they did not actually receive should contact the issuing state agency to request a corrected Form 1099-G showing zero unemployment benefits. Failure to do so may result in the taxpayer receiving an unexpected federal tax bill for unreported income. The taxpayer does not need to file Form 14039, Identity Theft Affidavit, which should only be filed if a taxpayer’s federal income tax return has been rejected because another return was already filed using the same Social Security number.
After the request is received, the state will send the corrected Form 1099-G to both the taxpayer and the IRS. In cases where a taxpayer does not receive a timely, corrected form from the state, the taxpayer should still file an accurate tax return only reporting income actually received.
As a reminder, if you did receive unemployment benefits, the amount should be included in taxable income on your federal income tax return.
Identity theft continues to be a growing concern
The IRS has announced it will expand the Identity Protection PIN Opt-In Program in January 2021 to all taxpayers with either a Social Security number or an Individual Taxpayer Identification Number. The identity protection personal identification number (IP PIN) is a six-digit number assigned to eligible taxpayers to help prevent the misuse of their Social Security number on fraudulent federal income tax returns. This program will be voluntary to opt in to, but due to security risks, the program is mandatory for confirmed identity theft victims.
How to Receive an IP PIN
Beginning in mid-January, the IRS will launch an online portal where, after completing an authentication process, taxpayers can immediately receive IP PINs. In a shift from prior policy, taxpayers who want to voluntarily opt in to the IP PIN program don’t need to file a Form 14039, Identity Theft Affidavit, and instead can use the online tool to receive their IP PIN.
This online tool uses Secure Access authentication, which relies on multiple factors to verify a person’s identity.
A taxpayer interested in using this method should have the following information ready for verification purposes:
- Email address
- Social Security number or Individual Taxpayer Identification Number
- Tax filing status and mailing address
- One of the below financial account numbers linked to the taxpayer’s name:
- Last eight digits of a credit card (no American Express, debit, or corporate cards)
- Student loan (note, the IRS can’t verify student loans issued by Nelnet)
- Mortgage or home equity loan
- Home equity line of credit
- Auto loan
- Mobile phone linked to the taxpayer’s name (for faster registration) or ability to receive an activation code by mail
Alternatively, taxpayers with incomes of $72,000 or less may complete Form 15227, Application for an Identity Protection Personal Identification Number, and mail or fax it to the IRS. Once the IRS receives the taxpayer’s Form 15227, an IRS assistor will call to verify the taxpayer’s identity with a series of questions. After successful authentication, the IP PIN will be mailed to the taxpayer.
Taxpayers who are unable to verify their identities remotely or who are ineligible to file a Form 15227 may make an appointment with a Taxpayer Assistance Center to go through the verification process in person, using two forms of picture identification. An IP PIN will be mailed to the taxpayer within three weeks of the in-person verification.
Spouses and dependents also are eligible for an IP PIN if they can pass the identity proofing process.
Implications of Requesting an IP PIN
Taxpayers who opt in to this program will be required to properly enter their IP PIN on electronic and paper tax returns to avoid rejections and delays. The IP PIN is valid for one year only, so a new IP PIN will need to be obtained every January. Note, however, that for confirmed victims of tax-related identity theft, the IRS will automatically mail IP PINs annually to confirmed victims and participants enrolled in the program prior to 2019. Such taxpayers also may use the online portal to retrieve lost IP PINs. There is no opt-out option for confirmed victims.
Taxpayers should not share their IP PIN with anyone other than their trusted tax advisor. The IRS will never call to request a taxpayer’s IP PIN, so the IRS urges participants to be vigilant to guard against scams attempting to obtain IP PINs.
To opt in to this program, taxpayers should visit the IRS website page https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin.
Jessica Cox, Senior Associate, joined BKD in 2019 as a tax associate in the National Office. She assists with the implementation and monitoring of the firm’s internal tax policies and procedures as well as using Excel Visual Basic for Applications (VBA) skills to design, create, and update resources for the firm’s tax practice.
Yelena Bosovik, Manager, is a member of BKD’s National Office Tax department, where her work includes researching and writing on various tax issues, monitoring tax legislation and guidance, risk management, quality control, and other firm-wide initiatives.
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