Income tax identity theft is a major problem. It costs the federal government and therefore the legitimate taxpayers an estimated 5 billion dollars per year. The IRS is fully aware of the problem and therefore has just issued final and temporary regulations that will go into effect two years from now that remove the automatic thirty day extension of time for employers to file W-2s in an effort to help curb income tax identity theft. Identity thieves often file their fraudulent income tax returns using counterfeit W-2s that indicate a large refund is due. Under the law, employers who file paper W-2s must file W-2s on the last day of February and if they file electronically, they must file the W-2s on March 31st, so the new regulations will prevent employers from extending those deadlines automatically to the end of March and end of April depending upon whether the employer is filing W-2s by paper or electronically.
However, the regulation is utterly useless and ineffective because under the present law, when an employer files W-2s, they are not filed with the IRS. They are filed with the Social Security Administration, which does not get around to forwarding them to the IRS for matching against submitted income tax returns to verify whether or not the W-2 filed with the individual’s income tax return is legitimate until July or August, which is long after the IRS has already sent out refunds without ever matching the W-2s filed by taxpayers with those filed by employers. The new regulation does not improve the situation at all. A far better solution would be for Congress to merely enact legislation requiring employers to file their W-2s with the IRS at the same time they file them with the Social Security Administration and for the IRS to match the W-2s filed by employers with those filed by taxpayers before the IRS sends out refunds. This simple and inexpensive step would dramatically reduce the amount of income tax identity theft. Congress and the IRS have been advised for years to do this, but they still have done nothing.
The best steps you can take to protect yourself from becoming a victim of income tax identity theft are to maintain the privacy of your Social Security number and file your income tax return as early as possible in order to beat an income tax identity thief from filing an income tax return in your name before you do. Meanwhile, we all should contact our Senators and Representatives to urge them to change the law to require employers to file W-2s with the IRS at the same time they file them with the Social Security Administration and for the IRS to match those W-2s with those filed by taxpayers before sending out refunds.
Here is a link to a website that will provide you with the email addresses of your Senators and Congressmen. http://www.contactingthecongress.org/