Editor’s Note: Becca Smith from Smith & Smith, CPA in Cary contributed this article.
Cary, NC – Tax season officially began on January 23rd. Like every year there are tax law changes, updates and different rules. Here are a few things to consider for your 2016 tax filing that pertains to the IRS identity theft regulations and the timing of your federal refund.
IRS tax identity theft refund scams have been growing over the years. This occurs when someone uses your personal information such as your name, social security number or other identity information, without your permission, to file a fraudulent tax return and claim a refund. Criminals doing this activity usually file early in the tax-filings season and receive the refund before the victim sends in their own return and has time to notice.
In order to cut down on fraudulent activity, the IRS, states and tax industry workers are working together to share and analyze data to help them identify theft returns. Some states are asking for driver’s license numbers as an additional step to authenticate your identity. So keep your license handy when you visit your tax professional. Also take a look at your W2 for a Verification Code. This is a 16-character code that was issued by the IRS to help verify the information on your W2 and will appear on about 50 million W2 forms. This code should be entered (by either you or the your tax preparer) when prompted by the tax software. It is okay to leave the entry blank if there is no 16-digit code on your W2.
Another way they are cutting down on fraudulent tax return filings relates to the Earned Income Tax Credit and the Additional Child Tax Credit. The IRS states that these returns will have any refunds held until February 15th. Congress passed a new law that gives the IRS time to verify the return for accuracy between the information on your W2 and 1099 with that on your tax return. So, by the time you add in holidays, weekends, and bank processing times, taxpayers will probably not see those tax refunds until the week of February 27th.
More information on these topics and others can be found here: https://www.irs.gov/individuals/new-security-safeguards.