Overview

Identity verification is the set of steps the IRS, tax software companies, and preparers use to confirm that the person filing a tax return is who they say they are. The goal is simple: stop fraudsters from using stolen Social Security numbers and personal data to file fake returns and collect refunds. In my 15+ years advising clients, proactive verification and quick responses to IRS notices are the difference between a smooth refund and a months‑long recovery process.

Background and why it matters

Tax-related identity theft increased as electronic filing and data breaches spread. The IRS reports that billions have been lost to refund fraud in prior years and continues to prioritize identity-protection efforts (IRS, Identity Theft Central: https://www.irs.gov/identity-theft-central). To combat this, agencies introduced layered checks such as identity verification letters, multi-factor authentication (MFA) for online accounts, and the Identity Protection PIN (IP PIN) program.

These measures shift some friction earlier in the filing process so valid taxpayers receive their refunds while stopping criminals. That friction often shows up as additional asks: a letter from the IRS, a request to verify prior-year income, or an invitation to use the IRS online verification portal.

How identity verification typically works

Verification varies by channel and risk level, but common elements include:

  • Known‑data checks: The IRS or tax software compares the return to information on file—SSN, date of birth, filing status, and prior-year adjusted gross income (AGI).
  • Document checks: You may be asked to upload or mail ID documents (driver’s license, passport) or tax documents such as W-2s.
  • Identity Protection PIN (IP PIN): A six-digit code issued to confirmed victims of identity theft or to taxpayers who register. The IP PIN must be entered on the return and prevents someone else using your SSN from filing a return successfully (IRS, Get an IP PIN: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin).
  • Multi-factor authentication (MFA): For online accounts (IRS, tax software, or your bank), MFA requires a second verification method—text message code, authenticator app, or hardware key.
  • Third-party verification: Tax preparers and platforms may use services that compare public and private records (credit headers, mobile device data) to detect anomalies.

When the IRS detects a possible fraud signal it may: hold the refund, send a notice requiring verification, or flag the account for additional review. These steps add time, but they prevent refunds from being paid to impostors.

Real-world examples from practice

One client received an IRS notice flagging their return for identity verification during peak season. The notice asked for copies of a driver’s license and last year’s return information. Because we responded promptly through the IRS online portal and enrolled the client in an IP PIN, the hold was lifted and the refund issued within a few additional weeks.

Another case involved a business with a recently changed EIN structure. The filing triggered verification checks at the IRS. By supplying formation documents, a signed authorization for the preparer, and adopting MFA on the business account, the owner avoided a prolonged delay.

These examples show that quick, complete responses and use of prevention tools reduce disruption.

Who is most likely to face identity verification

Anyone can be subject to verification, but common risk groups include:

  • People whose SSNs or tax records were involved in a breach.
  • Taxpayers who previously reported identity theft to the IRS.
  • First‑time filers and college students, whose records are often targeted.
  • Filers with sudden changes in income, filing status, or dependents.
  • Small businesses with changes in ownership or registration data.

If you’ve received notices from creditors, unexpected collection letters, or unexplained credit account openings, treat those as warning signs and watch tax filings closely (FTC: https://www.consumer.ftc.gov/topics/identity-theft).

Practical strategies to protect your refund

Implement layered protections—no single step is enough on its own.

  1. Enroll in the IRS IP PIN if you can: The IP PIN prevents someone else from filing using your SSN. Learn the enrollment requirements and use the official IRS tool to sign up (IRS IP PIN guidance: https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin).
  2. File early: Filing quickly reduces the window when someone else can submit a fraudulent return in your name.
  3. Use secure tax software and require MFA: Choose platforms with strong security practices and enable two-factor authentication.
  4. Protect documents and SSNs: Store paper records in a locked location; avoid sending sensitive documents by unencrypted email.
  5. Monitor credit and tax accounts: Regularly check credit reports and your IRS account transcript for unfamiliar activity.
  6. Use unique, strong passwords and a password manager: Avoid password reuse across sites.
  7. Respond promptly to IRS notices: If you receive a letter asking you to verify identity, follow the directions exactly and use the official IRS channels when possible.

What to do if the IRS asks you to verify identity

You may receive an IRS notice asking you to verify your identity. Typical steps:

  • Read the letter carefully—don’t ignore it. It will identify how to respond and the deadline. Examples and explanations are available at FinHelp’s guide on responding to IRS identity letters: “IRS Identity Verification Letters: What They Ask and How to Respond” (https://finhelp.io/glossary/irs-identity-verification-letters-what-they-ask-and-how-to-respond/).
  • Use the IRS online verification tool or follow the phone/mail instructions in the notice. Avoid calling numbers from unsolicited emails; use contacts from IRS.gov.
  • If you suspect identity theft, visit the IRS Identity Theft Central (https://www.irs.gov/identity-theft-central) and, when appropriate, file an Identity Theft Affidavit (Form 14039) according to IRS guidance.

Common mistakes and misconceptions

  • “I’m not a target”: Many victims had no prior signs. Don’t assume you’re safe simply because you haven’t experienced theft previously.
  • Using the same password everywhere: Reused passwords make it easier for criminals to pivot across accounts.
  • Sending documents by unencrypted email: Use secure portals when submitting IDs to tax professionals or the IRS.

Recovery and next steps if you are a victim

If a fraudulent return is filed, follow recovery steps: report identity theft to the FTC (https://www.identitytheft.gov/), file Form 14039 with the IRS if instructed, place fraud alerts or credit freezes with credit bureaus, and work with your tax preparer or a tax professional to clear your account. FinHelp’s step-by-step resources such as “Identity Theft and Your Tax Return: Steps to Take If You Are a Victim” can guide you through the timeline and paperwork (https://finhelp.io/glossary/identity-theft-and-your-tax-return-steps-to-take-if-you-are-a-victim/).

Helpful internal resources

For more on holds and verification reasons, see Understanding Refund Holds: Identity Verification, EITC, and Other Common Reasons: https://finhelp.io/glossary/understanding-refund-holds-identity-verification-eitc-and-other-common-reasons/

For details on the IP PIN program and when to enroll, see Understanding IRS Identity Protection PINs: https://finhelp.io/glossary/understanding-irs-identity-protection-pins/

Sources and further reading

Professional disclaimer

This article is educational and reflects general best practices and my professional experience advising taxpayers. It does not replace personalized tax or legal advice. If you face identity theft or an IRS notice, consider contacting a tax professional or attorney who can review your situation and help with specific filings.

By treating verification requests seriously, enabling available protections such as an IP PIN, and keeping records secure, you reduce the chance that someone else will claim your refund. Prompt, accurate responses to IRS requests usually restore access to your refund more quickly than delay or inaction.