Out of curiosity, if someone e-files fraudulently for you, are you held liable by the IRS if you are audited?
1. Scammer filed a tax return under my name/SSN, probably with a large return to their bank account/address
2. Later in the year I filed my tax return, but it was rejected because it thinks you have already filed
3. I called the IRS, then had to sign and mail affidavit confirming I am me and a fraudulent person filed my return. Then I mailed in my tax return.
4. ~8 months later the IRS mailed me something that confirmed fraud occurred and I wasn't liable for anything.
5. I wasn't audited so presumably they sorted it out and accepted my valid return
6. Now the IRS mails me a PIN number that needs to be used for filing my tax return [1]
I'll also note that in all the support phone calls with the IRS, they were really incredibly helpful, pleasant, and I never had any long wait times or anything.
1: http://www.irs.gov/Individuals/The-Identity-Protection-PIN-I...
1. The E-file PIN (5 digit PIN). This is the one most people use when they e-file. You either use a special IRS website or phone number to get it by verifying basic identification information about yourself. The problem is I believe all of this information is based on your 2013 tax return, so if a criminal has that, they can get your 5-digit PIN. This PIN is also delivered electronically, so there is no verification that the address information you enter is actually your address.
So when you are worried about somebody having your 2013 tax return, you are really worried about them stealing your e-file 5-digit PIN number.
2. Then you have the 6-digit PIN, which is generally only given out in the case of proven identity theft (though it seems as part of a pilot program they are giving it out more often). This PIN is mailed to your current address on file with the IRS, and is a randomly generated 6-digit PIN number which changes every year. If you are signed up for this program, your tax return will only be accepted if it has the proper 6 digit PIN number.
So if you have this, in order for somebody to fraudulently file a tax return under your name they'd have to steal your mail, which obviously is a lot harder.
More details:
https://ttlc.intuit.com/questions/2579455
http://www.irs.gov/Individuals/Get-An-Identity-Protection-PI...
It's not technically a PIN as there are letters in the code. Basically, we have a similar system to your second type.
By any other measure in a transaction that money ceases to be yours and becomes theirs. We can argue the merits of income tax or taxation in general, but in our (and many similar) systems, it's not your money if you wish to live in the country and thus partake in this transaction.