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Edward M. Osinski Jr., CPA PC
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 The IRS is changing some procedures that will affect the filing and processing of certain taxpayers’ federal tax returns for the 2011 filing season.

In January 2011, the IRS will send a new notice to some taxpayers identified as being victims of an identity theft that has affected the filing or processing of their federal tax returns in one or more prior tax years. These taxpayers have previously contacted the IRS concerning the identify theft and the IRS has validated their identity, verified that they were victims and adjusted their accounts.

The new notice (CP01A Notice) will provide the taxpayer with a 6-digit identity protection PIN (IP PIN), valid for a single use only when filing their 2010 federal tax return. To be effective, all six digits of the 6-digit IP PIN must be input, even if the first digit is zero. The IP PIN avoids delays in processing victims’ federal tax returns by helping the IRS distinguish between the genuine taxpayer, who has been issued the IP PIN, and a possible identity thief. If the taxpayer misplaces or loses the CP01A Notice, they will not be able to obtain a new IP PIN. Federal tax returns may be filed without using the IP PIN. However, if the return is filed without the IP PIN, or if the IP PIN is input incorrectly, there may be a delay in processing the return while the IRS validates the identity of the taxpayer. The IP PIN is valid for a single tax return and only for the 2010 tax year’s federal tax return. A new CP01A Notice and IP PIN will be issued each subsequent year in January for the new filing season for as long as the taxpayer’s tax account remains at risk for identity theft.

When preparing a federal tax return, practitioners should ask the taxpayer, as part of the interview process, if they have ever contacted the IRS regarding identity theft and, if so, if they have received a notice from the IRS containing a 6-digit identity protection PIN. If the taxpayer indicates that they did receive a CP01A Notice, you should input the six-digit IP PIN in the proper area on the tax return.

For electronic returns, the tax software program should contain a prompt asking if the taxpayer received a notice from the IRS containing a special 6-digit processing code. You can check with the tax software provider for information on the placement of the PIN prompt. Acceptance of the electronic return is subject to e-file acceptance standards without regard to the IP PIN. The space designated for inputting the IP PIN is located in the grey area to the immediate right of the spouse’s occupation on the printed Form 1040 (some software providers may not print the IP PIN as a security measure).

For paper returns, the CP01A Notice instructs the taxpayer to write the 6-digit identity protection PIN in the grey shaded area just to the right of the spouse’s occupation. Acceptance of the paper return is subject to IRS acceptance standards without regard to the IP PIN.

If you have any questions regarding the Identity Protection PIN, please submit them to idppinQuestions@irs.gov.  Please do not include sensitive, personally identifiable information in your e-mail. Remember, the IRS does not initiate taxpayer communications through e-mail.

Note: The identity protection PIN should not be confused with the electronic signature self-select PIN or be used for any other purpose.