www.irs.gov pub irs-pdf fw2-page-001The U.S. Government Accountability Office recently issued a report recommending that the deadline for employers to file Form W-2 with the IRS be moved up, in an effort to combat identity theft.

Since I have a little experience dealing with identity theft, this recommendation caught my eye.

Background

Employers must issue Form W-2 to employees by January 31 each year. But the deadline for the employer to send those W-2s to the IRS is later:

  • February 28/29 if filing paper forms with the IRS
  • March 31 if electronically filing with the IRS

E-filing of W-2s is not required unless the employer is filing 250 or more forms.

Proposal

The GAO proposal recommends:

  • Moving the deadline for employers to send W-2s to the IRS to January 31
  • Lowering the threshold for requiring the e-filing of W-2s to either 5 or 10

Would this Help Stop ID Theft?

The logic behind this idea is that it would help the IRS perform better computer matching on tax returns that are filed, thus perhaps reducing cases of identity theft.

Currently, if someone gets their W-2 on January 31 they can file their tax return and receive their refund weeks — maybe even months — before the person’s employer sends a copy of the W-2 to the IRS and that information makes it into the IRS’s systems.

My Thoughts

I think this is a good recommendation. I’ve always wondered why there are two different deadlines with W-2s anyway. If the forms are ready to give to employees, they’re ready to give to the IRS.

Maybe the deadlines are different so that employers can make corrections. But if the IRS provided a simple and penalty-free way to make corrections anytime, I don’t think having a January 31 filing deadline would be a problem.

My concern about moving up the deadline is that I’m skeptical of the information actually making its way into the IRS’s systems quickly.

How much re-coding would the IRS need to do to speed up the processing of W-2 information to make sure the information goes where it needs to go? How much re-coding would the IRS need to do to identify cases of identity theft?

It blows my mind that the IRS’s systems are not already set up to spot cases of blatant identity theft. For example, one address in Lithuania somehow received 655 fraudulent refunds before the IRS and their computers figured out that something was amiss.

Moving up the W-2 deadline should be done and it might be a partial fix to the problem of identity theft … but it’s one piece of a solution, not a cure-all.

 

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