In an effort to bolster protections to taxpayer data, the Internal Revenue Service (IRS) recently made two changes to its tax transcript system: redacting personal identifiable information from the transcripts and limiting access to the transcripts themselves. While these changes will enhance information security, they will hinder the ability of tax professionals to receive on-the-spot access to tax data needed to prepare returns or address tax controversies.
Generally, the IRS provides transcripts for taxpayers or tax professionals who require data regarding a tax account or return. The three most common transcripts are the (1) individual return transcript, which shows the items reported on each line of a 1040; (2) the account transcript, which shows a record of all changes to an individual or business taxpayer’s tax account, including payments, assessments, and abatements; and (3) the wage and income transcript, which shows all items of income paid to a taxpayer that were reported to the IRS. These transcripts are extremely useful to tax professionals preparing returns or dealing with tax controversies.
However, the IRS’s adjustments to its tax transcript system alter both the completeness of and access to the information presented in the tax transcripts. In September 2018, the IRS began redacting certain identifiable taxpayer and entity information from its individual tax transcripts. Individuals and tax professionals requesting an account, return, or wage and income transcript by fax or through online e-services received partially-masked transcripts. The redacted information proved too difficult to decipher in certain instances, especially on the wage and income transcripts. The IRS will mail unmasked transcripts to the taxpayer’s address of record upon request, although the second change to the transcript procedure provides an alternative for tax professionals to also secure the same information.
The second change took place on February 4, 2019, when the IRS will stop faxing individual and business transcripts. Previously, a taxpayer or authorized third-party could call the IRS and have a transcript faxed on the spot. Once the change takes effect, taxpayers will still be able to view masked transcripts through irs.gov or request an unmasked transcript by mail. Tax professionals will be able to access masked individual transcripts or unmasked business transcripts through IRS e-services Transcript Delivery System.
Along with this change, the IRS did add one option for tax professionals to access the unmasked data needed to prepare returns. Tax professionals with a Centralized Authorization File (CAF) number in good standing, who have an e-services account with access to a Secure Object Repository – the e-services secure mailbox – can call the IRS to request an unredacted transcript be deposited into their secure mailbox.
For assistance regarding your tax account, return, or income, Aronson LLC’s tax controversy team has the access to secure the information needed. If this is your situation or if you are having other issues with the IRS, contact Patrick Deane or Larry Rubin at 301.231.6200.