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New IRS tax transcripts protect taxpayer data

Posted on September 11, 2018

In a move to protect sensitive taxpayer data from potential fraud and misuse, the IRS announced that beginning September 23rd, a new individual tax transcript Form 1040 will be put in place. The new 1040 transcript removes taxpayer ID numbers from taxpayer-requested forms including Get Transcript Online, Get Transcript by Mail, or the Transcript Delivery System for tax professionals.

According to TSPA tax advisors, this is the latest advance the IRS has made to make it harder for criminals and nefarious third parties to impersonate individual taxpayers – and good news for taxpayers.

How does this new form keep taxpayer data safer?

Financial entries on the new form will remain, providing taxpayers and third-parties such as tax professionals the data they need for tax preparation or income verification, but social security numbers and Taxpayer ID numbers will no longer be printed on these forms. Instead, the IRS established a new Customer File Number that lenders, colleges and other third parties that order transcripts for non-tax purposes can use as an identifying number instead of the taxpayer’s SSN.

As of September 23, third parties and/or taxpayers can create any 10-digit number for use as an identifier, except for the taxpayer’s SSN. Each Customer File Number will be automatically posted and visible on the requested tax transcript, allowing the third party to match the document to the taxpayer. (A Customer File Number can be, for example, a loan account number.)

Here is the information that will be provided on the new transcript:

  • Last 4 digits of any SSN will be listed as: XXX-XX-1234
  • Last 4 digits of any EIN will be shown as:  XX-XXX-1234
  • Last 4 digits of any account or phone number
  • Only the first 4 characters of the last name for any individual
  • Only the first 4 characters of a business name
  • First 6 characters of any personal or business street address, including spaces
  • All money amounts, including balance due, interest and penalties

Along with this new form, the IRS also will post an updated Form 4506-T and Form 4506T-EZ, Request for Transcript of Tax Return, including a new Line for a 10-digit Customer File Number instead of the previously used SSN or Tax ID. These forms are most frequently requested by legitimate third parties with a need for income verification or tax data.

There is no change in the process for students seeking income verification through Free Application for Federal Student Aid (FAFSA) or disaster victims seeking FEMA assistance. Business tax transcripts will also not change.

Although this new IRS measure will offer some protection against tax fraud, Teipen Selanders Poynter & Ayres cautions all taxpayers that being vigilant with all financial data as well as personal or tax information is still the best course of action.