Skip to Content

September 24, 2014


To fight identity theft, IRS urged to change W-2 requirements

A new Government Accountability Office report includes recommendations for the Internal Revenue Service designed to cut identity theft and fraud. The first is to advance the W-2 filing deadline. The second is to lower a threshold for the electronic filing of W-2 Forms.

In a preliminary analysis of 2013 tax filings, the IRS identified approximately $5.2 billion in fraudulent identity theft refunds. Current safeguards prevented the agency from sending an additional $24.2 billion in refunds. This highlights the size of the problem.

The GAO asserts that the IRS “look-back” compliance model allows individuals to obtain many refunds using stolen identities. The agency issues refunds after selected reviews, but not before completing all compliance checks. Unfortunately, detecting tax fraud after the fact often makes it harder to recover the funds.

Recognizing that there are no easy or simple solutions, the GAO still asserted that moving the W-2 filing deadline to January 31 would allow the agency to match employer and taxpayer reported wage data. Under the current process, the IRS does not have sufficient data to start this analysis until July after the end of tax season. Identifying discrepancies pre-refund would reduce the number or fraudulent refunds sent out each year.

A reduction in the e-filing threshold from 250 returns to five or 10 W-2s could also aid the agency in pre-refund matching. The Social Security Administration also estimated cost savings of approximately $.50 per W-2 e-filed with the expansion. Paper filings of W-2s take longer to process and delay the matching process.

The IRS will review resources needed to implement the recommended changes, but it is unlikely they will be in place before the 2014 tax filing season.

Source: Accounting Today, “IRS May Shift W-2 Deadlines to Combat Identity Theft and Tax Fraud,” Michael Cohn, Sept. 22, 2014