Individuals and authorized tax preparation professionals can request and receive tax transcripts from the IRS to assist with accurate financial reporting and tax preparation. These tax transcripts are important official records and contain sensitive personal information about individuals that could compromise their security.
The IRS now redact certain information from tax transcripts to reduce the potential for identity theft, tax fraud, or other criminal activities. We’ll share the main changes to tax transcripts under the new IRS approach.
Certain Identifying Numbers and Other Details Are Partially Redacted on a Tax Transcript
The IRS says that the following information will be visible on the new tax transcripts.
- The last four digits of any Social Security Number included in the transcript, for example, XXX-XX-1234.
- The last four digits of any employer Identification Number included in the transcript, for example, XX-XXX1234.
- The last four digits of any account number included in the transcript, for example, XXXXX4243.
- The last four digits of any telephone number included in the transcript, for example, XXX-XXX-5555.
Other Identifying Details
- The first four characters of the last name for any individual included in the transcript. Only the first three letters will be shown if the last name has only four characters, for example, MILLXX
- The first four characters of any business name included in the transcript, for example, GOOGXX
- The first six characters of any street address included in the transcript, including spaces, for example, 1600AXXXXXXXXXXXXXXXXXXXX
- All money amounts, including wage and income, balance due, interest, and penalties
Properly authorized tax professionals can request unredacted wage and income transcripts to assist with tax preparation or e-filing needs. These new tax transcripts are currently only applied to individuals, they do not currently impact business returns and information.
Where the New Tax Transcripts are Used
These new, redacted tax transcripts are available for transcripts sent online and those requested via the IRS telephone ordering service or the tax professional TranscriptDelivery System.
Requesting a Tax Transcript
These changes have slightly altered how tax preparers are required to request tax transcripts for clients. You need to fill in form 4506-T or form 4506-EZ. Line 5b allows you to include an optional “Customer File Number” which is a unique identifier. This will be visible on the transcript and allows a third party to match the transcript to the taxpayer.
Tax preparers can still obtain an unredacted transcript by calling the IRS directly and requesting one. The IRS will then mail a copy of the transcript to your client.
What the New Tax Transcript Design Means for Tax Preparers
The change to tax transcripts is designed to increase security and reduce identity theft issues for individuals. The redacted information may cause small issues for your business while you adjust to the new system, and it’s important to keep the following items in mind:
- All financial entries and figures will remain visible.
- When preparing prior-year returns, tax professionals can:
- Request Form W-2 and other necessary documents directly from their client.
- Get their client to go to “Get Transcript Online” and request to download their transcript.
- Get their client to ask the IRS to mail a tax transcript to them.
- Use the “Transcript Delivery System” for tax professionals.
The IRS Plans to Make More Changes to Transcripts
This isn’t the end of the planned changes to the tax transcript system. The IRS is planning to:
- Stop faxing individual or business transcripts to individual taxpayers.
- Stop faxing individual or business transcripts to third parties, including accountants, CPAs, and other tax professionals.
- Mail documents to a taxpayer’s address of record.
- Stop mailing transcripts to third parties, instead of sending such requests to the taxpayer’s address.
Although these changes may delay tax preparation slightly, they do introduce new security for individual taxpayers, which will reduce the risk of identity fraud and theft.