Most people have heard that you can protect your identity with the IRS. After hearing so many stories recently in the news even as of February 9, 2016 regarding a malware program trying to get E filing numbers, how many people don’t want IRS identity protection? The answer of course is everyone or at least the law abiding citizens do, right? Identity theft IRS proposals for protecting the public mean speeding up some processes and slowing down others and also the tried and true PIN programs. With the electronic filing and IP PIN programs the bad citizens need both the social security number and the PIN number. It isn’t likely they will have both but they still manage to do it.

How They Do It

The bad citizens will simply create a W-2 and file it along with the tax return to the IRS. Of course, they need a real social security number and a name, and this is where the identity theft occurs. The IRS doesn’t require the employer to file their W-2 s until sometime before March 31st , so not a problem if the W-2 doesn’t check out. To file a 1040 personal tax return not only do you need a matching name and a valid social security number but you also need to authenticate your identity with a PIN to E file unless you file through a paid tax practitioner. Most likely this will send bad citizen on a phishing trip. Not for fish but for information. Some tactics bad citizen has used this year are:

1. Working to get information from human resource personnel.

2. Asking taxpayers to verify tax information over the phone.

3. Acting as if they represent one of the tax preparation companies that operate in the tax industry.

Bad citizen might make a phone call directly to the taxpayer, or use email to get as much information as possible and including the taxpayer’s PIN. The IRS has set up a special email to report these phishing schemes.

The latest scam is for bad citizen to take control of a paid tax practitioner’s computer and change the information in more than one tax return so refunds get redirected to them. Since a tax practitioner can enter an E file number with any 5 digit number that isn’t all zeros for clients bad citizen can easily work around this security feature after gaining access to the computer. The tactic won’t work with all tax preparer companies as up to date accounting and tax firms store their information in the Cloud and not on their computers. These cloud bases are generally local companies who can afford and understand better how to secure sensitive data

The next way for bad citizen to take someone else’s identity is by stealing their real W-2 in January. Taxpayers may not notice their W-2 is missing because some taxpayers do not know when their W-2 will be sent to them from their employer. Even if the taxpayer notices the form didn’t come the bad citizen can file a tax return with the stolen W-2 before the victim has a chance to get another copy from the employer. In the time it takes to get another W-2 and file their 1040 tax return bad citizen has already filed it for them; however, it was filed with a different mailing address. The address on the W-2 and the tax return don’t have to match. Bad citizen knows only a certain amount of time is available to make the schema a success.

Even better for bad citizen is to claim refundable credits by having several social security numbers along with their matching names. The refundable credits the government provides to single moms or low income individuals can amount to income redistribution in the thousands of dollars.. Now, bad citizen is on the way to getting a handsome refund and the phishing has never been better. Tax refund fraud accounted for 915,000 cases for the IRS in 2013 equating to around $5 billion dollars.

How They Want to Protect Us

The IRS sent 800 bad citizens to prison in 2013 for this crime and that number is rising. The IRS published its top 10 identity theft prosecution cases for 2015 on its website. Read it because it is stunning. The numbers measure in the millions of dollars for certain individuals. Not to be critical but in this light it does seem it has taken some time for new proposals to even be presented. Two important new proposals are as follows:

1. W-2 s or 1099 s need to be sent to subcontractors or employees by the end of January; however, they have not been required to file the forms with the IRS until March 31st within certain other parameters. Under new proposals. The IRS would require the forms to be filed with the IRS within 15 days that the employees or subcontractors receive their forms.

2. Under new proposals the employers would have to file the W-2 s with only the last four numbers of the employees social security number showing.

The Identity Protection PIN (Suspended currently)

The IP PIN is different than an E filing PIN but it is used in the same way. However, you must meet four criteria to get an IP PIN.

1.You received one in 2014

2.You received a CP01A letter

3.You received a letter inviting to opt in

4.You can opt in if you lived in Florida, Georgia, or D.C.

Currently the IP PIN program is suspended. The IRS is refining the program and further strengthening the security features. It can be surmise at some point everyone will need a secret PIN to file their taxes either online or paper based.