IRS Password Service May Have Led to Identity Theft, Credit Problems for Nearly One Million Taxpayers

The Internal Revenue Service (IRS) recently suspended a service designed to protect against taxpayer fraud because, somewhat ironically, it may have actually led to a significant amount of fraud and tax-related identity theft.

The IRS service provided taxpayers with special personal identification numbers (PINs) when those taxpayers were flagged as possible victims of identity theft. This year, the IRS mailed the special IP PINs to approximately 2.7 million people. Once a person received their personal IP PIN, they could go online and file an electronic tax return. (Alternatively, the taxpayer could print the online tax return and then mail it to the IRS.)

Although the IRS is not suspending the IP PIN service, it is taking steps to safeguard it because an internal audit determined that roughly 800 tax returns were fraudulently filed using the special PINs mailed by the federal agency. This was particularly embarrassing for the IRS in light of the fact that these PINs were supposed to be an effective tool to combat taxpayer fraud and identity theft.

It is believed by federal officials that the fraud may have been committed by hackers who found a way to gain access to the IP PINs through the IRS online system. For instance, when a taxpayer lost or forgot their IP PIN, they could retrieve it by answering four “security” questions. However, investigators determined that the answers to these questions could often be found by looking at a person’s social media accounts, making it easy for hackers to file fraudulent tax returns using the PINs and then receive tax refunds.

The IRS’ “password retrieval” system was administered through the credit reporting agency Equifax. Now the IRS is suspending this service and requiring any taxpayer who may have forgotten or lost their IP PIN to directly call the IRS in order to retrieve it.

Identity theft is the kind of thing that can destroy a person’s credit. Even if you are able to clear up the issue, your credit rating may never recover. These are the same kinds of problems faced by anyone who is struggling with debt: your credit could be permanently damaged while you attempt to get back on your feet. That’s why it is important to consult with a qualified tax and debt lawyer who can explain the complexities involved in clearing up your debt issues and make sure you are on the right financial path.

To learn more, check out the article, “How a Special IRS Security Tool Led to More Taxpayer Rip-offs.”


If your credit is in jeopardy and you are in need of debt relief, whether it’s due to credit card debt, tax-related issues or any other reason, you should talk to a qualified debt relief and bankruptcy lawyer. Joel R. Spivack is an experienced bankruptcy and debt management attorney who can help you if you are considering filing for bankruptcy or need to rebuild your credit. Contact Mr. Spivack today to schedule a free consultation and explore your options.

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Attorney Joel R. Spivack is an experienced bankruptcy and residential real estate transactions lawyer in Cherry Hill, New Jersey. Clients come to us for legal services, but what we really provide is peace of mind. For more than 30 years, Attorney Spivack has helped people make wise, informed decisions about bankruptcy filings, debt relief options and residential real estate transactions.
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