The Internal Revenue Service is taking steps to further protect taxpayers’ data from identity thieves, initiating new restrictions on its online tax transcript service.

The agency will no longer offer to fax tax transcripts and will also stop mailing tax returns or transcripts to third parties. The fax service ends this month with the third-party mailings to stop in July.

Tax transcripts are summaries of tax return information. They have become more vulnerable as identity thieves impersonate taxpayers or authorized third parties. Transcripts obtained in this way are used to file fraudulent returns for inflated refunds and are difficult to detect since they mirror a legitimate tax return.

An IRS news release says the halt to faxing and third-party mailings are the two latest steps the IRS has taken to protect taxpayer data. “In September 2018, the IRS began to mask personally identifiable information for every individual and entity listed on the transcript,” the release states. “At that time, the IRS announced it intended to stop its faxing and third-party mailing service, and has since worked with tax professionals to assure they have what they need for tax preparation and representation.”

The announcement the end of the fax service means the IRS will stop faxing tax transcripts to both taxpayers and third parties – including tax professionals – as of June 28. The decision covers both individual and business transcripts.

Options for Taxpayers

Individual taxpayers have several options to obtain a tax transcript. They may:

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

Options for Tax Practitioners

Tax professionals also have several options to obtain tax transcripts necessary for tax preparation or representation: 

• Request that the IRS mail a transcript to the taxpayer’s address of record, or
• Use e-Services’ Transcript Delivery System online to obtain masked individual transcripts and business transcripts, or
• Obtain 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 practitioners may:
  • Obtain 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
  • Obtain an unmasked wage and income transcript if authorization is already on file by using e-Service’s Transcript Delivery System.

Third-Party Mailings Stop July 1

The IRS will no longer provide transcripts requested using Form 4506, Form 4506-T or Form 4506T-EZ to third parties effective July 1. The forms will be updated to remove the third-party mailing option.

These forms are frequently used by lenders and others to verify income for non-tax purposes. Colleges and universities are among the biggest users, filing the forms to verify income for student aid. Tax pros are also large volume users.

The IRS offers the following solution:

“Taxpayers may continue to use these forms to obtain a copy of their tax return or obtain a copy of their tax transcripts. This change will NOT affect use of the IRS Data Retrieval Tool through the Free Application for Federal Student Aid (FAFSA) process.”

Third parties who use the forms for income verification have other choices as well.

The IRS offers an Income Verification Express Service (IVES) which has several hundred participants, who, with proper authorization, order transcripts. Lenders or higher education institutions can either contract with existing IVES participants or become IVES participants themselves. The tax transcript is an official IRS record. Taxpayers can choose to provide transcripts to requestors instead of authorizing the third party to request these transcripts from the IRS on their behalf.

Tax professionals who are attorneys, Certified Public Accountants or Enrolled Agents (i.e., Circular 230 practitioners) and do not have an e-Services account may create one and, with proper authorization from clients, can access the e-Services’ Transcript Delivery System. Unenrolled tax practitioners must have an e-File application on file and be listed as delegated users to access TDS.

Use Customer File Number to Match Transcripts

The taxpayer’s name and Social Security number are now partially masked on transcripts, so the IRS also created a Customer File Number field that can be used to help third parties match transcripts to taxpayers.

As an example, third parties can use the space to assign a loan application number or student identification number for use as the Customer File Number. The number will populate on the transcript and help match it to the client.

For more information on Customer File Numbers, check out About the New Tax Transcript and the Customer File Number.