W-2 Verification Code Expansion

As part of the ongoing efforts to combat identity related fraudulent returns, the IRS is expanding its initiative to verify the authenticity of W-2’s through the use of W-2 Verification Codes. This effort started in 2016 when the IRS partnered with certain payroll service providers to include a 16-character alphanumeric Verification Code on many of the W-2’s provided to employees. This code is placed in Box 9 of the W-2 and the IRS encouraged tax professionals to include this code on returns that are electronically filed. In TaxSlayer Pro, the W-2 entry menu allows the user to key this code in Box 9 of the entry screen.

When the IRS announced the W-2 verification initiative in 2016, the Service specifically stated that omitted or incorrect Verification Codes would not delay the processing of any tax return or the issuance of any refund during the 2017 filing season. However, the IRS’s position on the issuance of refunds may be changing for the 2018 filing season.

The IRS announcement for the 2018 filing season regarding the expansion of W-2 Verification Codes for 2017 states that “omitted and incorrect verification codes will not delay the processing of the tax return,” but it no longer states that omitted and incorrect verification codes will not delay refunds. Moreover, the IRS announcement urges taxpayers and tax professionals to include the Verification Code whenever it exists on a W-2 “as it can speed the processing and the issuance of the refund.” Accordingly, to avoid any unnecessary delay this tax season in the issuance of a refund, tax professionals should enter the Verification Code whenever it is on the W-2.

W-2’s that are generated for tax year 2017 by select payroll service providers (ADP, Ceridian, Intuit, Paychex, Payroll People, Prime Pay and Ultimate Software) as well as the National Finance Center (which issues W-2’s for certain federal agencies) will have a Verification Code. The IRS estimates that this tax season approximately 25% of all W-2’s will have a Verification Code. This Verification Code does not have to be entered on a paper return but should be entered on any return filed electronically.