Article Highlights:

  • IP PIN
  • Identity Verification
  • Opt-in Program
  • Application Process

: In the past, the IRS has assigned verification numbers to victims of identity theft to file their tax returns, if requested by the victimized individual. These numbers are referred to as identity protection (IP) PINs. The IP PIN is a six-digit code known only to the taxpayer and the IRS. It helps prevent identity thieves from filing fraudulent tax returns using a taxpayer’s personally identifiable information.

The IP PIN serves as the key to an individual’s tax account. Electronically filed returns that do not contain the correct IP PIN will be rejected, and paper returns will go through additional scrutiny for fraud.

The IRS launched the IP PIN program nearly a decade ago to protect confirmed identity theft victims from ongoing tax-related fraud. In recent years, the IRS has expanded the program to specific states where taxpayers can opt into the IP PIN program. Now, the voluntary program is going nationwide.

Key things you should know about the IP PIN opt-in program:

  • The program is voluntary.
  • You must pass a rigorous identity verification process before IRS will issue you an IP PIN.
  • Spouses and dependents are eligible for an IP PIN if they can verify their identities.
  • An IP PIN is valid for a calendar year, and a new IP PIN must be obtained each year.
  • The online tool to apply for IP PINs is offline between November and mid-January each year.
  • Correct IP PINs must be entered on electronic and paper tax returns to avoid rejections and delays.
  • Never share your IP PIN with anyone but your trusted tax professional. The IRS will never call, text or email requesting your IP PIN. Beware of scams to steal your IP PIN.
  • There currently is no opt-out option, but the IRS is working on one for 2022.

If you want an IP PIN for 2021, go to IRS.gov/IPPIN and use the Get an IP PIN tool. This online process will require that you verify your identity using the Secure Access authentication process if you do not already have an IRS account. See IRS.gov/SecureAccess for what information you need to be successful. There is no need to file a Form 14039 (Identity Theft Affidavit) to opt into the program.

After you have authenticated your identity, a 2021 IP PIN will immediately be revealed. Once in the program, this PIN must be used when prompted for electronic tax returns or entered by hand near the signature line on paper tax returns.

All taxpayers are encouraged to first use the online IP PIN tool to obtain their IP PIN. Taxpayers who cannot verify their identities online have options, as explained next.

Taxpayers whose adjusted gross income is $72,000 or less may complete Form 15227, Application for an Identity Protection Personal Identification Number, and mail or fax it to the IRS. An IRS customer service representative will contact the taxpayer and verify their identity by phone. Taxpayers should have their prior year’s tax return at hand for the verification process.

Taxpayers who verify their identities through this process will have an IP PIN mailed to them the following tax year. This is for security reasons. Once in the program, the IP PIN will be mailed to these taxpayers each year.

Taxpayers who cannot verify their identities online or by phone and who are ineligible to file Form 15227 can contact the IRS and make an appointment at a Taxpayer Assistance Center to verify their identities in person. Taxpayers should bring two forms of identification, including one government-issued picture identification.

Taxpayers who verify their identities through the in-person process will have an IP PIN mailed to them within three weeks. Once in the program, an IP PIN will be mailed to these taxpayers each year.

Taxpayers who are confirmed identity theft victims or who have filed an identity theft affidavit because of suspected stolen-identity refund fraud will automatically receive an IP PIN via mail once their cases are resolved. Current tax-related identity theft victims who have been receiving IP PINs via mail will experience no change.

If you have questions related to the IP PIN program, please call.

4 Questions Business Owners Should Consider During the 2020 Tax Season

As if 2020 wasn’t challenging enough, this season’s tax-filing is going to be even more complicated than usual. Though the CARES Act and the Paycheck Protection Program were put into place to help small businesses, the old adage about “no such thing as a free lunch” is proving true once again as business owners sit down to gather their documents and realize just how big an impact the changes will make on what they can and can’t deduct, on payroll tax, and many other elements of their filing. We encourage you to speak with our office as soon as possible so that you can get some insights into the specific effect on you and your business. Start by asking these questions and go from there.

  1. I took a Paycheck Protection Program loan. How will it impact my taxes?

The PPP loans were attractive because they were forgivable if used for the intended purposes. Normally, under tax law, when debt is forgiven it becomes taxable income. However, by law the PPP loan forgiveness is also tax exempt, which means it is not taxable income. The IRS had taken the position that the business expenses paid for with the forgiven loan proceeds would not be deductible expenses for tax purposes. The passage of the COVID-Related Tax Relief Act in December 2020 has overridden the IRS’s interpretation in Rev Ruling 2020-27. Thus, the expenses are fully deductible even though the loan is forgiven. CAUTION: This may not be true for state tax purposes.

  1. I deferred my payroll taxes. When are they due?

As part of the CARES Act, employers struggling with making payroll were offered a life raft in the form of a deferral of the employer’s portion of their employees’ Social Security payroll taxes. The deferral applied to the 6.2% Social Security tax on wages paid for the period from March 27, 2020 to the end of the year. If you are one of the many businesses that chose to take advantage of the deferral, you will need to pay the first half of what’s owed by December 31, 2021 with the balance due one year later on December 31, 2022.

  1. How does the CARES Act impact how net operating losses are handled?

Back in 2017, the Tax Cuts and Jobs Act eliminated the net operating loss (NOL) carrybacks for most businesses, but under the CARES Act, NOL carrybacks are allowed for tax years 2018, 2019 and 2020 in the form of a five-year carryback That means that for each of the last three tax years you can carryback losses five years and any unused NOL is then carried forward until used up. You can also elect to forgo the carryback and carry the losses forward, whichever provides the best outcome for your business. The CARES Act also suspended the rule that the taxable income of the carryback or carryforward year can only be reduced by 80% as a result of the NOL. That suspension only applies to NOLs originating in 2018, 2019 and 2020.

  1. I had employees working remotely in different states. Will that affect my taxes?

One of the biggest tax headaches introduced by the pandemic has been the effect of having employees working in different states. Though in most cases these temporary changes will not have an impact, it is important that you ask your accountant about your specific situation, as some states have introduced new tax regulations in order to recoup some of their tax losses.

Additionally, if your business is like many others and you are considering making remote work permanent, then any employees living and working in other states may put you in the position of having to pay those states’ business taxes as well as withhold state income tax on the employees’ wages.

Understanding the full impact of this past year may take a long time, but for right now, business owners need to address the challenge of preparing their taxes. Start speaking with our office as early as possible so that you have plenty of time to come up with a workable strategy.

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