The Internal Revenue Service has issued proposed regulations to create a new taxpayer identifying number known as the IRS Truncated Taxpayer Identification Number, or TTIN, that can be used instead of a Social Security number in response to the growing problem of identity theft-related tax fraud.
The TTIN would provide an alternative to using a Social Security number (SSN), Individual Taxpayer Identification Number (ITIN), or IRS Adoption Taxpayer Identification Number (ATIN). The filer of certain information returns would be able to use a TTIN on the corresponding payee statements to identify the individual being furnished a statement. The TTIN would display only the last four digits of an individual’s identifying number and is shown in the format XXX-XX-1234 or ***-**-1234.
The IRS has been struggling to curb identity theft. From 2008 through the middle of 2012, the IRS identified more than 600,000 taxpayers who have been affected by identity theft. Last tax season, the IRS added filters to its system to check for signs of identity theft, stop suspicious tax returns and contact the taxpayer before the return is processed, but that in turn led to delayed tax refunds for millions of taxpayers (see Fraudulent Tax Refund Attempts Caused Delays for Legitimate Taxpayers in 2012). The IRS has also enhanced the use of Identity Protection Personal Identification Numbers for identity theft victims.
In 2011 the IRS protected $1.4 billion in refunds from being erroneously sent to identity thieves, according to the IRS Advisory Council. Through mid-April 2012, the IRS had stopped over 325,000 questionable returns with $1.75 billion in claimed refunds using filters specifically targeting refund fraud.
However, the impact of identity theft on tax administration is significantly greater than the amount the IRS detects and prevents, according to the Treasury Inspector General for Tax Administration. TIGTA’s analysis of tax returns using characteristics of IRS-confirmed identity theft has identified approximately 1.5 million tax returns with potentially fraudulent tax refunds totaling in excess of $5.2 billion. TIGTA estimates that the IRS could potentially issue $21 billion in fraudulent tax refunds over the next five years as a result of identity theft.
The IRS’s proposed regulations would affect the filers of certain information returns who will be permitted to identify an individual payee by use of a TTIN on the payee statement furnished to the individual, and those individuals who receive payee statements containing a TTIN. The TTIN can be used in payee statements on 1099, 1098 and 5498 series forms, except for the 1098-C. The IRS has already begun testing the use of the TTIN under a 2011 pilot program.
13 Comments
1) The number is a truncated SSN, so there is NO new number. 2) We have several ID Theft problems in our office every year (about 1,000 clients). They do take longer to get the refund..most about the same amount of time as ALL others because the tax return is MAILED to the IRS with supporting docs (Copies of everyone's ID cards & SS Cards). So that is HOW the victim gets the refunds. 3) So NO new number, no further assault on everyone's privacy. I do not get the people that work in customer service(as an EA I feel our tax practice is a customer service business) how can you get mad at the IRS for doing the same thing all the ID Theft help tips say- do not put complete Credit card numbers or SSN on payments, use an X in the correct format except for the last four numbers? 5) I am not sure if my clients have gotten the pins yet but the computer system did create 600,000 pin letter so it will probably take a while for everyone to get their PIN that needs them. 4) They probably started to use the SSN for everything because computers were not powerful enough to cross-check an account# with the SSN so the system could only keep track by one set of numbers so someone choose the social security number. Now many states like CA assign an account# to everyone besides the SS# and the only way a person knows the account# is if they get a billing statement from the State of CA. 5) Lighten-up they are trying very hard to stem all the ID Theft! They are NOT the creator of the problem! Thieves are!
Posted by: sholbtx | January 17, 2013 7:19 PM
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The easiest fix to the fraud problem is to do away with online filing. No information needs to verified when someone sits at a computer and puts in numbers. As tax preparers we must verify everything. I luckily have had only 1 customer fall to identity theft in 2011, and they still have not gotten their 'special' number. Could be interesting filing for them this year
Posted by: mkbmktg | January 13, 2013 9:26 PM
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If the correct (or close to correct) amount of tax was deducted from employee wage packets each week/month etc., there would be less of a need to make refunds in the first place. Perhaps the IRS should look to the UK to see how it's done although I accept that HMRC are not perfect by any stretch of the imagination.
Does the IRS pay interest on the tax that they have been overpaid and eventually return to taxpayers?
Posted by: SimonP | January 9, 2013 8:29 PM
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Looks like it is also a new technique of selling a future fee structure by some blue-eyed company or software developer of IRS / Govt. because these new ideas are nothing but lust of making money one way or the other.
Posted by: khanswali | January 9, 2013 8:00 AM
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What is happening within the IRS, Con-gress, etc. is just a sampling of the overall general decline in this country. It will only get worse from here on out for the public.
Posted by: taxking | January 9, 2013 6:30 AM
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I have said this before and no one seems to get it.
1) As far as my research goes the original federal statutes say our SSN are not to be be used for any other form of identification.
2) The use of our SSN for federal income tax identification was adopted by the IRS, without changes to SS statues.
3) If I were sitting on the board of a credit card company and someone purposed to use my SSN as my credit card number, given my id number will be publicly published after my death, they would be fired.
These people are buffoons and once again this points to what I have said 10,000 times in my life, these people would be out of business if they had to directly compete with private industry.
Posted by: WCSCPA | January 8, 2013 9:27 PM
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I am apalled that none of you guys get this. Hitler did the same thing by tattooing the Jewish during WW2 and Obama is using 1099k, PTIN, Circular 230 and now as I have said for years, the new id number for citizens to track them further. Just wait, as this will replace your SS# and soon they will have it all. Here is your clue-COMMUNISM. HOW MANY RIGHTS MUST WE LOSE BEFORE WE WAKE UP? Are we cattle just being led by an empty suit to our ends? How many little guys lost their businesses to Circular 230 alone? Now, a taxpayer cannot have a choice of preparers, good or bad, but must use one that Obama can track, sound like someone I mentioned earlier? I hate to be so negative, but the truth has it's own license to speak. Geithner gets confirmed while owing taxes and employing illegals, we get suspended-that's what I call DEMOCRACY.
Posted by: BRES | January 8, 2013 3:18 PM
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I had only 3 ID thefts in my office last year but I am a very small office in rural Oregon. I have called a number of times and they are very good at telling me/the taxpayer what to do to get the ball rolling and there it stops. One of them I have called a number of times and get the same response. (what I should do to "FIX" the problem!) So I agree no real fix is happening for the T/P and refunds are held up and the future returns (after the theft) can be filed as the IRS would just take the refund for the debt owed as a result of the theft. Are we just a bunch of monkeys chasing our own tails??? And yes another number to keep tracked of................very good Service!
EAGLEWOMANCHER
Posted by: EAGLEWOMANCHER | January 8, 2013 1:17 PM
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And, they'll probably outsource this to some 3rd party who will have to charge 62.50 a year to issue it, like the PTIN numbers that tax preparers now have to purchase each year... and what will keep people from stealing these numbers, as well?
Posted by: cmchiker | January 8, 2013 1:13 PM
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Let me get this straight. The answer to the numbers fraud is a new number? Oh, that will work. Only a bureaucrat come up with these bright ideas. So what makes them think this new number can't be hijacked?
and with this identity theft problem at home, and the IRS focus offshore with FATCA, how will they deal with the increased ID theft that that will happen around the globe to Americans abroad? Once they get all U.S. Persons around the world tagged and reported via 3rd party vendors and corrupt governments into BIG data bases,just waiting to be hacked, will they solve it with a new FATCA number, a FTIN ??
Heaven save us.
Posted by: Just Me | January 8, 2013 3:34 AM
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I have several clients that have received their PIN #'s. The ones that received them are the ones still fighting with the IRS for their 2011 refund
Posted by: THESSIAC | January 7, 2013 11:59 AM
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I agree with your comments. The IRS promised to have a 6 digit PIN number to all taxpayers in December who had their ID stolen on thie 2011 return and the 15 cases I had, NONE have had such an item showing up in their mailbox! Come on IRS, get your act together and quit adding additional suffering to these poor folks who had their ID stolen and then waiting a LONG time for thier refunds.....djb cpa :~((
Posted by: DJBradach | January 7, 2013 8:26 AM
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The IRS has not issued the special pin numbers to any of my clients whoes idendity was stolen. They have also not cleared one case yet.
Posted by: gness1843 | January 7, 2013 7:26 AM
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