IRS to stop faxing tax transcripts

The Internal Revenue Service said Tuesday it plans to end faxing of tax transcripts in June, as well as stop third-party mailing of tax returns and transcripts in July, in an effort to curb identity theft.

Timothy Fadek/Bloomberg

The IRS noted that tax transcripts have become increasingly vulnerable as criminals impersonate taxpayers or authorized third parties. Identity thieves use tax transcripts to file fraudulent returns for refunds that are hard to detect because they resemble legitimate tax returns. In 2015, the IRS had to take its online Get Transcript application offline after discovering that cybercriminals had used the app to get information on hundreds of thousands of taxpayers. It later restored the app after adding taxpayer authentication features.

The end of faxing and third-party transcript mailing this summer follow on the heels of earlier effort to protect sensitive taxpayer data. Last September, the IRS started masking personally identifiable information for every individual and entity listed on the transcript. At the time, the IRS announced it planned to stop its faxing and third-party mailing service. Since then, it has worked with tax professionals to make sure they have the facilities needed for tax prep and representation.

Individual taxpayers will still have several options available to obtain a tax transcript. They can:

• Use IRS.gov or the IRS2Go app to access Get Transcript Online. After verifying their identities, taxpayers can immediately download or print their transcript; or

• Employ IRS.gov or the IRS2Go app to access Get Transcript by Mail; transcript will be delivered within 10 days to the address of record; or

• Phone (800) 908-9946 for an automated Get Transcript by Mail feature; or

• Submit Form 4506-T or 4506T-EZ to have a transcript mailed to the address of record.

Tax pros will also have some options available to get the tax transcripts they need for clients for tax preparation or representation:

• Ask the IRS to mail a transcript to the taxpayer’s address of record; or

• Use e-Services’ Transcript Delivery System online to get masked individual transcripts and business transcripts; or

• Get a masked individual transcript or a business transcript by calling the IRS, faxing authorization to the IRS assistor and the IRS assistor will place the document in the tax practitioner’s e-Services secure mailbox.

When needed for tax preparation purposes, tax pros can:

• Get an unmasked wage and income transcript by calling the IRS, faxing authorization to the IRS assistor and the IRS assistor will place the document in the tax practitioner’s e-Services secure mailbox; or

• Get an unmasked wage and income transcript if authorization is already on file by using e-Service’s Transcript Delivery System.

Third-party mailings

Starting July 1, the IRS will stop providing transcripts requested on Form 4506, Form 4506-T and Form 4506T-EZ to third parties, and the forms will be amended to remove the option for mailing to a third-party. These forms are often used by lenders and others to verify income for non-tax purposes. Among the largest users are colleges and universities verifying income for financial aid purposes. Tax professionals also are large volume users.

Taxpayers can continue to use the forms, though, to get a copy of their own tax return or a copy of their tax transcripts. The change won’t affect use by students and their parents of the IRS Data Retrieval Tool through the Free Application for Federal Student Aid (also known as FAFSA) process.

Third parties who use the forms for income verification will still have some other alternatives to employ. The IRS provides an Income Verification Express Service (IVES) that has several hundred participants. They can order transcripts with the proper authorization. Lenders or higher education institutions can either contract with some of the existing IVES participants or they can become IVES participants themselves. The tax transcript is an official IRS record. Taxpayers can also opt to provide transcripts to requesters instead of authorizing the third party to request these transcripts from the IRS on their behalf.

Tax professionals who are attorneys, CPAs or Enrolled Agents and who don’t have an e-Services account can create one. As long as they have proper authorization from their clients, they can then access the e-Services’ Transcript Delivery System. Unenrolled tax practitioners need to have an e-File application on file and be listed as delegated users to access TDS.

Because the taxpayer’s name and Social Security number are now partly masked, the IRS has created a Customer File Number space that can be used to help third parties match transcripts to taxpayers. Third parties can assign a Customer File Number, such as a loan application number or a student ID number. The number will be filled out on the transcript and help match it to the client or student.

More information about the Customer File Number can be found here.