Businesses will be unable to have their tax transcripts faxed to them or have their tax transcripts shared with lenders under new rules the IRS announced on Tuesday.
The agency will end its tax transcript faxing service in June and stop the mailing of some tax returns and transcripts to third parties in July.
The move is in response to security concerns. Fraudulent tax returns filed using the sensitive information of businesses and individuals has become a problem the IRS has wanted to crack down on.
“Transcripts have become increasingly vulnerable as criminals impersonate taxpayers or authorized third parties,” the IRS’s announcement states.
This action affects both individual and business transcripts, and the IRS will also stop faxing the tax transcripts to individuals and third parties, including tax professionals. Because business transcripts are also affected, businesses will now have to use alternative means to obtain tax transcripts needed for tax preparation. One alternative method is to work with the IRS’s digital e-Services platform to obtain the transcripts.
In addition, the IRS will modify some of its forms so that transcripts will not be mailed or faxed to lenders and others to verify income for non-tax purposes. The taxpayers could choose to provide the transcripts to the requestors instead of allowing the third party or request those transcripts from the IRS on their behalf.
These actions come as a result of the IRS’s cybersecurity initiative and concern for protecting the data of taxpayers.
Data breaches are a big concern; Quest Diagnostics announced that the personal information of up to 12 million people may have been exposed. A billing vendor for Quest Diagnostics was compromised, in turn compromising the data of Quest Diagnostics’ customers.
With these actions limiting how tax transcripts can be sent and to whom they can be disseminated to, the IRS hopes to limit the number of fraudulent tax returns filed targeting both individuals and businesses.
The IRS has taken previous actions to protect the data of individuals and businesses and protect against fraudulent returns. One such previous action includes hosting an annual Security Summit to develop recommendations for ways to protect the data of taxpayers. The most recent Security Summit found that identity thieves are changing their tactics and are targeting businesses and tax professionals more.
Preventing such a breach of taxpayer data remains a priority of the IRS.
“The halt to the faxing and third-party service this summer are two more steps the IRS is taking to protect taxpayer data,” the IRS’s announcement states.