A revamped tax transcript is now available for individual taxpayers and tax professionals. The IRS previously announced the improvements to the transcript design, which is aimed at making the product more secure.
Transcripts are a prime target of hackers and identity thieves, since transcripts can provide the real taxpayer data that can make a fraudulent tax return harder to identify as bogus.
The new transcripts will display:
- Last four digits of any SSN listed on the transcript: XXX-XX-1234
- Last four digits of any EIN listed on the transcript: XX-XXX1234
- Last four digits of any account or telephone number
- First four characters of the last name for any individual (first three characters if the last name has only four letters)
- First four characters of a business name
- First six characters of the street address, including spaces
- All money amounts, including wage and income, balance due, interest and penalties
This improved design will be used by the Internal Revenue Service for transcripts delivered online, via the toll-free telephone ordering system and the Transcript Delivery System used by tax professionals. It should be noted that the new transcript is for individual transcripts only; it will not be used, at this time, for business transcripts.
Tax transcripts have proven useful for non-tax uses, such as income verification for loans or college financial aid. The new format, while abbreviated, will still carry enough information to meet the needs of those who request the report.
Impact on Tax Pros
Financial entries on the revamped tax transcripts will still be fully visible. Tax practitioners preparing prior-year returns for clients have a number of additional options to obtain wage, income and tax information paid for non-filing individuals. The IRS says the tax pro can:
- Obtain Form W-2 and income documents from the client;
- Ask the client to access Get Transcript Online to immediately download and print a redacted wage and income transcript;
- Ask the client to request a mailed transcript via Get Transcript by Mail or call toll-free assistance to have a transcript mailed to the address of record. Mailed transcripts are delivered within five to 10 business days;
- Access e-Services Transcript Delivery Service for tax professionals for immediate access to a redacted transcript if there is proper authorization;
- Ask toll-free assistance to mail a redacted transcript to the client’s address of record.
If needed for tax return preparation, a client may also order a complete (not redacted) wage and income transcript through the IRS. However, the client must firs authenticate their identity with the IRS before a complete wage and income transcript showing all the information can be mailed to the address of record. If a tax practitioner is unable to get Forms W-2 from the client, or if the client is unable to get a complete (not redacted) transcript at the address of record, then the tax pro may have to file a paper return.
Customer File Number
The IRS has also made security changes to Form 4506-T and Form 4506T-EZ, Request for Transcript. Both forms now include a new field, appearing on Line 5b, for a Customer File Number. This 10-digit number is created by the person filing the request, not the IRS. This optional information acts as an identifier for the account since the Social Security number will no longer be fully visible.
While this Customer File Number will fully appear on the transcript it will not be searchable by the IRS. Any 10-digit number is allowable except the taxpayer’s SSN.
Tax professionals requesting transcripts through the Transcript Delivery System (TDS) may also assign a Customer File Number to the transcripts they request. As with the taxpayer requests, tax pros will have the option of assigning a 10-digit number for an identifier on the transcript, enabling the requester to match the transcript to the taxpayer.
More Changes Ahead
The IRS warns that it plans to stop faxing transcripts to both taxpayers and third parties (including tax professionals) sometime around January 2019. This will apply to individual and business transcripts alike. When taxpayers or third parties call the IRS to request an individual or business transcript, the document will be mailed to the taxpayer’s address of record – not faxed. The online system will remain available, using the user authorization system. Tax professionals can continue to get transcripts through TDS.
The change comes as a response to security threats. The IRS says it’s considering this step because identity thieves can impersonate both taxpayers and tax preparers but the IRS can’t independently verify fax numbers given by callers.
The IRS also says it will stop mailing transcripts to third parties sometime around May 2019. Currently, Line 5a of the Form 4506-T and 4506T-EZ is used to specify the third party to receive the transcript. This line will be deleted from the form and thereafter requested transcripts from the two forms will be mailed to the taxpayer’s address of record, not to third parties.
For more information, check out the IRS Fact Sheet online.