As of March 7, the IRS was still encouraging taxpayers who had had their identities stolen by fraudulent refund filers in the past to take the added precaution of getting an Identity Protection Personal Identification Number before filing this year. As of March 9, the agency had pulled the plug on the tool saying it had failed to offer the security intended.
This is a fairly significant bit of egg on the face for the tax collecting body, and is something that we are sure tax law practitioners across Minnesota and the rest of the country are following with a lot of interest. It's these kinds of issues that can lead to taxpayer and tax filer confusion, litigation and appeals.
The case of one South Dakota woman serves as a stark example of the kind of problems being dealt with. As a story in The Washington Post explained, her headaches started in March 2015. She went to file her federal return only to be told that a return in her name had already been sent in February. Someone had snatched her identity as had a lot of other Americans and inflated returns had been filed by fraudsters.
The IP PIN was to make things all better this year. The woman and 2.7 million other taxpayers received their special six-digit codes. By using them when filing electronically, the IRS would be sure that the right person was filing the right return this time.
Unfortunately, the woman found someone had filed in her name yet again this year. And the IRS said the culprit had even used her IP PIN to do it.
It's not clear how the crooks might have gotten their hands on the secure number. Some experts suggest it might have been because the IRS made it pretty easy for people to retrieve lost or forgotten numbers. They used a system based on providing basic personal information.
In the case of the woman from South Dakota, there's speculation that the same scammers that snatched her identity used that information to get her IP PIN this year.
She didn't lose out on her refund this year because she refiled, in person, before it got sent. But one has to wonder how many weren't so lucky.