Bills
| 3.23.22

Should All Taxpayers be Able to Get an IRS PIN to Make Their Tax Returns More Secure? (S. 240)

Do you support or oppose this bill?

What is S. 240?

(Updated July 29, 2020)

This bill – the Taxpayer Identity Protection Act of 2019 — would require the Treasury Dept. to expand its Identity Program PIN (IP PIN) pilot program, which provides PIN numbers that may be used in conjunction with a Social Security Number (SSN) or other identifying information to assist in verifying an individual’s identity upon request.

This bill wouldn’t require taxpayers to use IP PINs; instead, it’d allow them to opt in to the program if they want an extra layer of identity protection.

If enacted, this bill would require the Treasury Dept. to make this program available to any individual living in the U.S. within five years of its enactment. This five-year incremental expansion is meant to provide accountability to ensure that the IRS is adequately building out and supporting the IP PIN program, which simultaneously ensuring that taxpayers have access to the IP PIN program as soon as possible.

Argument in favor

Identity theft tax refund fraud — in which fraudsters file false tax returns to steal people’s tax refunds — is a multi-billion dollar crime that costs taxpayers and the federal government time, money, and resources. Giving all taxpayers the option of getting PINs to add a layer of security to their tax returns will help combat this crime.

Argument opposed

The IRS has already made the IP PIN pilot program available to victims of past identity theft tax fraud, as well as all residents of states where this crime is more likely to occur. Expanding the IP PIN program to all Americans prematurely, before the IRS is confident its system can handle it, risks putting too much pressure on the IRS’ system and compromising the IP PIN program.

Impact

Taxpayers; tax returns; identity theft tax refund fraud; Treasury Dept; and the IRS.

Cost of S. 240

A CBO cost estimate is unavailable.

Additional Info

In-Depth: Sen. Susan Collins (R-ME) introduced this bill to thwart identity theft tax refund fraud and prevent American taxpayers and seniors by requiring the IRS to expand its Identity Protection Pin (IP PIN) pilot program nationwide over the next five years. In remarks on the Senate floor, Sen. Collins argued that this legislation is needed to protect Americans’ tax refunds:

“Having an IP PIN has proven to protect against identity theft.  This is a concrete action that we can take to help protect taxpayers from being ripped off by criminals and ensure that they receive the refunds to which they are entitled. The IRS supports the expansion of this vital program over the next five years.  I encourage my colleagues to vote for the adoption of our bipartisan bill.”

In her Senate testimony. Sen. Collins added that criminals have made filing phony tax refund claims in real filers’ names a big business, as they’ve figured out that it’s “cheaper and easier for them to steal taxpayers’ identities and hijack their tax refunds than it is to traffic in drugs or rob banks.”

Sen. Doug Jones (D-AL), an original cosponsor of this bill, adds that the IP PIN pilot program’s effectiveness is proven:

“The IP PIN pilot program has shown it can effectively defend taxpayers from the growing risk of identity theft, and it is critical that we take this next step to expand the program. As these threats grow, it’s important that the federal government make every effort to help protect taxpayers’ identities. While doing so, this program can also help save billions of dollars by preventing fraudulent tax returns.”

The American Institute of CPAs (AICPA) has long supported giving all taxpayers PINs, writing to the Senate Finance Committee in September 2015:

“The growing amount of fraudulent tax refunds paid and the economic and emotional impact to individual victims of identity theft are unacceptable. We have previously supported and continue to support several proposals addressing identity theft, including… the expansion of the IP PIN system… The AICPA has previously urged the IRS to consider issuing IP PINs to all individuals, and appreciates Congressional action in this area.”

RSM International, a global network of independent audit, tax, and consulting firms, notes that there’s “growing support” for expanding the IP PIN program, but the IRS’ current systems aren’t equipped to handle such an expansion yet:

“There is growing support for extending the voluntary IP PIN program to taxpayers in every state. However, until the IRS’s systems are fully equipped to handle a widespread IP PIN program, the program will remain limited to victims of identity theft and to taxpayers in the listed states.”

According to the Journal of Accountancy, the IRS already intends to expand the IP PIN program to all taxpayers once its systems are able to handle it this expansion.

This bill has one cosponsor, Sen. Doug Jones (D-AL).


Of Note: Identity theft refund fraud is when a scammer files a false tax return using a stolen Social Security Number (SSN) and other personal information, receiving a taxpayer’s tax refund from the IRS instead of the actual taxpayer receiving the return. This scam wastes taxpayer dollars, jeopardizes taxpayers’ legitimate refunds, and threatens the IRS’ integrity.

While the IRS has made significant progress in combating identity theft refund fraud, this crime continues to be one of the biggest challenges facing the agency. In 2016 alone, refund fraud cost the IRS $1.7 billion. In 2015, the IRS paid even more — over $5 billion — in fake claims. Those who are defraud in these schemes often have to wait months or even years to receive the refunds that they’re legally entitled to. In 2017, the Federal Trade Commission (FTC) received over 82,000 complaints related to tax refund fraud. These schemes often target vulnerable older citizens: in 2010, approximately 76,000 seniors were victims of identity theft refund fraud.

In December 2018, USA TODAY reported that “thanks to a concerted effort from federal and state governments and the private sector,” IRS figures showed that the number of reported tax identity theft victims from January through October 2018 was down 19 percent from 2017, and down 72 percent from 2015.

The IRS’ IP PINs are six-digit numbers assigned to eligible taxpayers, which allow their tax returns and refunds to be processed without delays and help prevent taxpayers’ SSNs from being misused on fraudulent income tax returns. If a tax return is filed with an SSN and an incorrect or missing IP PIN, the IRS’ system automatically rejects the return until the filter’s identity can be confirmed. According to the IRS, the IP PIN program rejected approximately 7,376 fraudulent e-filed tax returns in just one month during the 2017 tax season.

The IRS has offered IP PINs since 2013. They’re currently available to victims of identity theft as well as all residents of Florida, Georgia, and the District of Columbia (the first three test sites for the program), as well as California, Delaware, Illinois, Maryland, Michigan, Nevada and Rhode Island, which have the highest per-capita percentages of identity theft refund fraud in the U.S. In 2018, the IRS issued nearly 3.5 million IP PINs to taxpayers — up from 770,000 in 2013.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / NoDerog)