Thursday, September 17, 2015

IRS Considers Earlier W-2 Filing Date for Employers

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During the 2015 tax season, Stolen Identity Refund Fraud crimes, commonly referred to as SIR F crimes, received a lot of publicity. In response, IRS Commissioner John Koskinen convened a “security summit” in March with IRS representatives, state tax officials, tax return software developers, and tax preparation companies. One of the group’s tasks was to study ways to prevent SIRF crimes. One method suggested is to have employers file taxpayers’ Forms W-2 earlier in the year. Koskinen says that the IRS needs taxpayers’ wage data earlier so that it can identify fraudulent returns before it issues refunds.

In June, the American Payroll Association sat down with staff on the House Ways and Means Committee and the Senate Finance Committee, to explain the burden this would place on payroll professionals. APA representatives explained, “Complying with an earlier filing deadline is possible, but there will be unintended consequences.” If employers have to rush to get the data reported, it will become less reliable. There is no doubt that employers will end up having to file corrected Forms W-2—that’s the W-2c—for more employees.

Currently, W-2s need to go out to employees by January 31, but employers don’t file them with the government for another month or more. Tax season 2015 officially opened on January 20. Even if the filing deadline is moved to January 31 so the government receives the data at the same time the employee gets it, there will still be a window between the opening of the filing season and the availability of the wage data.

Senator Ron Wyden (D-Oregon) believes the solution to this problem is moving the filing date up even earlier.

“If the IRS had access to the data on W-2 and 1099 forms from the very beginning of tax season, it would be much easier to catch fraudulent returns early and save taxpayers the nightmare of a stolen refund,” Stated Wyden.

Every day the filing deadline is moved up results in less time for employers to ensure their data is correct. This could lead to more errors in the system. The result will be, while SIRF crimes may decrease, more people will end up having to file their taxes twice. As an alternative, the APA has asked the IRS to consider moving back the tax season. That would provide both the IRS and taxpayers more time to work with better data.

Do you think an earlier filing date will help prevent stolen identity refund fraud? Let us know what you think in the comment section below and check back with Pay News Now as this issue develops.