IRS Officials Preview Impending Tax Transcript Changes Aimed to Prevent Identity Theft

21 June 2019

IRS officials previewed during a June 19 webinar certain impending changes to tax transcripts that aim to prevent identify theft refund fraud. Generally, the IRS will no longer fax tax transcripts beginning June 28 and will cease third-party mailing of tax transcripts on July 1, (IR-2019-101).

Five Types of Tax Transcripts

The following list contains the five types of tax transcripts, as noted by IRS officials:

  • Tax Return Transcript – summary of original tax return
  • Tax Account Transcript – summary of basic data plus any changes made post-filing
  • Record of Account Transcript – combines Tax Return and Tax Account transcripts
  • Wage and Income Transcript – summary of data from information returns, i.e., Forms W-2, 1099, etc.
  • Verification of Non-Filing Letter- provides proof of no return on file

Prior Tax Transcript: Obvious Vulnerability, Risk for Taxpayers

The prior unmasked format and available methods of delivery of the tax transcript enabled identity thieves to access sensitive taxpayer information, according to the IRS. “The tax transcript was an obvious vulnerability,” an IRS official said. “What we were finding was more and more tax transcripts were falling into the hands of identity thieves.”

New “Masked” Tax Transcript Format

Because of the high incident of fraud surrounding tax transcripts, the IRS has created a new tax transcript system in which taxpayers’ identifiable information is partially “masked” or redacted.

However, all financial entries on the transcript will remain visible. The new “masked” transcript format for individuals will be in place as of September 2018, according to IRS officials.

The following information will be visible on the newly formatted tax transcript:

  • Last four digits of any Social Security Number (SSN) listed on the transcript;
  • Last four digits of any Employer Identification Numbers (EIN) listed on the transcript;
  • Last four digits of any account or telephone number;
  • First three to four characters of the last name for any individual;
  • First four characters of a business name;
  • First six characters of the street address, including spaces; and
  • All financial information, including wage and income, balance due, interest and penalties.

Tax Transcript: Alternatives to Faxing

Generally, the IRS will stop faxing most tax transcripts beginning June 28. Moving forward, individual taxpayers may use the Get Transcript Online tool to view a masked transcript or order one by mail for delivery to their address of record. Additionally, taxpayers may request an unmasked Wage & Income transcript for purposes of tax preparation. Notably, the unmasked transcript must be mailed to the taxpayer’s address of record.

However, tax professionals with proper authorization may request unmasked Wage and Income Transcripts for tax preparation and e-filing purposes. The unmasked Wage and Income Transcript is available to tax professionals through their Transcript Delivery Service (TDS) access. Faxing of certain masked, internal transcripts will still be permitted if unavailable through TDS.

Tax Transcript: Alternatives to Third-Party Mailing

On July 1, the third- party mailing option on Forms 4506, 4506-T, and 4506T-EZ will end. According to the IRS, the third party mailing option presented too great of a risk to taxpayers. Thus, in early July, the IRS will post revised versions of these Forms no longer containing the third-party mailing option.

As noted above, tax professionals can access individual and business transcripts through TDS. However, high volume users of third-party mailing, such as lenders and certain tax professionals, can become or contract with participants in the Income Verification Express Service (IVES) program.

New Customer File Number

Additionally, the IRS has created a new Customer File Number so that taxpayers’ sensitive identifying numbers are no longer used to match taxpayers to transcripts. Generally, SSNs are used to match transcripts to client. However, because the SSN and ITN are now masked, the IRS created an alternate way to match clients to the transcript. The Customer File Number is a 10-digit number that can be used to match the transcript to the client.

COMMENT. If an unmasked Wage and Income Transcript is necessary, a tax professional may contact the Practitioner Priority Service (PPS) line. The unmasked Wage and Income transcript will be sent to the practitioner’s Secure Object Repository (SOR), available through e-Services. However, tax professionals must have an e-Services account and pass Secure Access authentication to use the SOR option.