Tax Transcripts: The IRS Increases Protection of Data

Most taxpayers save copies of their tax returns immediately after they file. Whether you’re getting a loan for your newest business venture or applying for financial aid for your child to attend college, a review of your previous years tax returns is customary. So what happens when it’s time to pull out your tax return and you can’t find it? No worries. The IRS has you covered. While they don’t actually still have your original tax return, the information included in your original tax return has been summarized in a transcript, which essentially includes all the necessary information that you or any other interested party would need in relation to your tax returns. This is the perfect for solution for situations in which tax return files were destroyed by natural disaster, a person dies and makes you executor of their estate, or you simply misplaced your tax return. The use of tax transcripts has also become a perfect solution for unintended parties: criminals with your social security number. With your past tax transcripts in had, filing fake returns for a refund becomes a cinch because criminals can easily make the fraudulent return have similar entries as the transcript. The IRS has had enough!

The IRS has decided to implement a few changes to help protect taxpayers data.

  • In September 2018, the IRS began partially masking out personally identifiable information on transcripts. The only information that is now visible includes:
    • Last four digits of any SSN, EIN, account, or telephone number listed on the transcript
    • First four characters of a business name or the last name for any individual (first three characters if the last name has only four letters)
    • First six characters of the street address, including spaces
    • All money amounts, including wage and income, balance due, interest and penalties
  • Effective June 28, 2019, the IRS will end the faxing of transcripts to taxpayers and 3rd parties, such as tax professionals. Taxpayers can still call the IRS, submit form 4506-T/4506-T-EZ, or utilize IRS.gov or the IRS2Go app to request tax transcripts for downloading or mailing. As for tax professionals, they can request the IRS mail a transcript to the taxpayer, obtain a masked transcript by calling the IRS or using e-Services Transcript Delivery System, or obtain an unmasked copy by maintaining a taxpayer authorization on file with the IRS assistor.
  • Effective July 1, 2019, the IRS will stop providing transcripts requested using Form 4506/Form 4506-T/4506T-EZ to 3rd parties, in addition to removing the form option for mailing to a 3rd party. Individuals can still use these forms, the largest users, such as lenders, higher education institutions, and tax professionals, will now need to use the IRS Income Verification Express Service (IVES) or e-Services or simply request the transcript from the taxpayer.

While these changes will not eliminate transcript fraud, the controls that the IRS is putting in place are helping to ensure that transcripts go to the rightful and legal parties.