I know many individuals who have had their identity stolen and fraudulently used for federal income tax returns. The IRS has stepped up its game to try to minimize use of one’s Social Security number by providing a PIN to use in combination with the Security Society number for identification in filing their tax return. However, there could be a lot more done. The PIN is being offered only to first-time filers or ones who have experienced a previous fraudulent return. This leaves the door open to attempts on filers who haven’t yet been scammed. Seems some simple things could be done by the IRS to be pro-active and save billions.
One simple way would be to delay all refunds until a W-2 is on file with the Social Security Administration. The Social Security Administration shares/reconciles with the IRS. In my research I found that even though employers with more than 250 employess must provide a W-2 to the employee by Jan. 31, they have until March 31 to file using business online the W-2 information to the IRS. So early filings for refund by identity thieves in February and March are allowed without a W-2 to match. Or the IRS could make it mandatory for all filers to use a PIN on their return.
Finally, thought needs to be taken on methodically disconnecting the SSN from identity. Forcing by law all financial businesses and federal agencies to issue individual PINs every year by certified mail for identity purposes makes sense, and it would give the U.S. Postal Service needed business.